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State rail company banks on $650mln DBSA loan for revival
19/05/2015 00:00:00
by The Source

THE National Railways of Zimbabwe (NRZ) struggling with debts amounting to nearly $300 million is banking on a $653 million loan from the Development Bank of South Africa (DBSA) to revive its undercapitalised operations, transport minister Obert Mpofu has said.

Mpofu told Parliament on Monday that the NRZ and DBSA had signed a mandate letter for a $653 million loan to be repaid over a period of up to five years and would engage a technical partner to support the borrowing to avoid government guarantees.

“The partner will jointly carry out the rehabilitation with NRZ and participate in a profit sharing arrangement with the organisation,” Mpofu said.

He said the NRZ and its technical partner would carry out joint marketing strategies targeting regional traffic to generate business that will support repayment of the loan.

NRZ owes its creditors $230 million and $65,8 million to workers who recently demonstrated demanding their dues and has a debtors book worth $10,5 million.

Mpofu said revenue the company was generating was not enough to pay its 6,500 workforce and meet other operational obligations.

“The infrastructure and equipment still in a very poor state, there is a very narrow customer base due to negative customer perception of rail service quality and its existence with industry operating at low capacity,” he said.

The ailing parastatal, which like most state enterprises does not regularly release it financial statements, recorded losses amounting to $106 million between 2009 and 2011, according to the government auditor’s report.

Mpofu said NRZ has registered a decline in business over the past decade with volumes declining to 3,8 million tonnes in 2014 down from 9,5 million tonnes in 2000, attributed to antiquated equipment, lack of capital and vandalism.

The latest available statistics show the number of NRZ locomotives declined to 80 in 2006 from 101 in 2000 while wagons available declined from 9,019 in the year 2000 to 5,824 in 2006.

NRZ locomotives are aged between 32 years and 50 years, yet their lifespan is 25 years. The wagons age ranges 45 and 60 years while design life is 40 years.

Mpofu said the company’s turnaround strategy centred on the need to address the company’s poor infrastructure and equipment where no investment has taken place in the past 25 years in order for NRZ to capture local and regional traffic.


He revealed that previous efforts to get Chinese investment into the NRZ had failed to bear fruit.

“The major challenges faced with the Chinese projects have been failure to access credit facilities.

NRZ has not been accommodated in previous government facilities despite taking the initiative to raise $2,9 million deposit in 2004 towards procurement of locomotives,” he said.

A breakeven was expected at NRZ in two years, with business volumes projected to return to 9 million tonnes after five years, the minister added.

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