IDBZ makes a pitch for NRZ

14 May, 2017 - 00:05 0 Views
IDBZ makes a pitch for NRZ Thomas Zondo Sakala

The Sunday Mail

Business Reporter
REVIVING the country’s rail system could be a key enabler to Government’s economic growth efforts, as this mode of transport is 40 percent cheaper relative to road transportation, Infrastructure Development Bank of Zimbabwe (IDBZ) chief executive officer Mr Thomas Zondo Sakala has said.

He noted that there is need to consider revamping the National Railways of Zimbabwe (NRZ), a state entity, as part of investments into sprucing up local infrastructure.

“The challenge before us is not to just address the power industry . . . but I am happy that we are working on efforts to increase power generation. There are issues of transport, the railway line. We need to do something about NRZ. There is no way we can talk seriously about beneficiation, about industrialisation, if we don’t have NRZ working efficiently. “Road transport, yes, but it has its limits and we need NRZ to get back to full capacity. Rail transport is 40 percent cheaper than road transportation,” said Mr Zondo Sakala at an investment conference recently.

The Ministry of Transport and Infrastructure Development has since raised the flag on the bad state of the parastatal’s finances.

However, the NRZ, which requires an estimated US$16 million to execute its strategic plan for the year, is actively lobbying Government to take over its US$176 million debt burden. Further, the NRZ believes it might need a US$400 million sovereign guarantee if it manages to get a suitor.

In the interim, there are plans to raise US$2,5 million from scrap metal sales. It is understood that out of NRZ’s 166 locomotives, 60 are working while 108 passenger coaches – out of 332 – are still usable. Management at the company say a disproportionately high number of staff relative to revenues has progressively eroded the institution’s capacity.

NRZ has, however, since whittled down its workforce from a record 20 000 employees at Independence to 12 000 in 1990. Currently, its workforce stands at 5 000. As part of broad measures to recapitalise the state entity, Government announced in February that it had acquired 31 rail wagons worth US$2,9 million.

Plans to dispose a 60 percent stake or raising funds from the open market are also being considered. A huge capital outlay – estimated at US$635 million over the next three years – is needed to rehabilitate the track, signaling and telecommunications infrastructure, including the re-electrification and acquisition of rolling stock.

Presently, Zimbabwe has two rail operators: NRZ and Beitbridge Bulawayo Railway project (BBR). The Beitbridge-Bulawayo railway line – which is 320 km long – was constructed under a concession signed in 1998 with BBR.

Overall, NRZ operates an extensive rail network stretching 2 760km across the country. Industry has continued to make representations to Government to consider restricting bulk commodity haulage to rail.

It is also envisaged that an improved rail infrastructure will help spare the country’s road network which, as the only available and convenient transport mode, is currently burdened by an increased load.

At its peak, NRZ moved 18 million tonnes of freight annually. Last year, it managed a mere three million tonnes. But the company is targeting to move 3,7 million tonnes this year.

Separately, the IDBZ believes the general local business environment can be significantly improved by reviewing the obtaining interest rates and simplifying the tax regimes.

Zimbabwe is considered to have the highest tax rate in the region at 37 percent.

Mr Sakala said: “If you look at interest rates in the region, the average is 5 percent to 7 percent, (but) in Zimbabwe it is 15 percent to 20 percent. But critically, it is 15 percent to 20 percent on a US dollar; this is not the Zimdollar. And we also have some legacy loans, even in IDBZ where interest rates on the US dollar loans were as high as 35 percent, 40 percent (early into dollarisation).

“Nowhere in the world can you do business on that interest rate on a US dollar loan.”

The Reserve Bank of Zimbabwe recently capped the interest rate on loans at 12 percent, but microfinance institutions charge up to 25 percent. The IDBZ also believes that accessing long-term concessionary finance will help the country’s re-industrialisation strategy gain traction.

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