NRZ financial closure nears

26 Aug, 2018 - 00:08 0 Views
NRZ financial closure nears

The Sunday Mail

Financial closure for the US$400 million recapitalisation of the National Railways of Zimbabwe (NRZ) is set to be achieved in the near future, at a time when the investors are targeting moving 4 million tonnes of freight by February next year.

The increase in tonnage will represent a 48 percent jump from 2,7 million tonnes achieved in 2017 on an annualised basis.

Financial closure is the process of completing and terminating the financial and budgetary aspects of a project being performed.

The Diaspora Infrastructure Development Group (DIDG) and Transnet of South Africa won the US$400 million tender to recapitalise NRZ and work has begun in earnest, with the investors bringing in 14 locomotives, 200 wagons and seven passenger coaches.

DIDG executive chairman Mr Donovan Chimhandamba told The Sunday Mail Business last week that they expect financial closure soon.

“NRZ turnaround started a while back and every day we continue to edge closer to financial closure,” said Mr Chimhandamba.

“We already think that NRZ, on an annualised basis by February 2019, has a real shot at cracking 4 million tonnes coming from 2,7 million tonnes in 2017.

“So we are focused on the results and we truly believe as soon as all is in place, we will be able to ramp up production towards 8 million tonnes.”

Mr Chimhandamba said the locomotives, wagons and passenger coaches brought into the country so far are an interim solution but as volumes grow, more wagons and locomotives are expected.

Negotiations and the transition to a new rail concession company (JV2) – which will be the new company running NRZ or replacing it – appear to be taking long because of a “myriad of complex issues” affecting many stakeholders.

Issues still under discussion include employees, assets, workshops, working capital, suppliers’ contracts, customer contracts, pension and medical funds, scrap and debt, among others.

“These are the things we are dealing with, which one entity or person cannot sanction without written agreement with affected parties.

“The good news is that all stakeholders are very aligned and this (negotiation) should not take as long as it ordinarily would have in similar projects, but the bottom line is, none of these issues is stalling the project in terms of bottom line impact which should be measured simply by volume moved,” said Mr Chimhandamba.

Efforts of boosting rail value chain companies

As DIDG and Transnet move ahead with efforts to revolutionise NRZ operations, the investors are keen to help other companies in the rail value chain.

Almost a fortnight ago, DIDG and Aveng Infraset of South Africa announced a possible 50:50 joint venture US$10 million deal to revive Fort Concrete, a Gweru-based concrete products manufacturer.

Fort Concrete is owned by Aveng Infraset.

The deal, which will see US$3 million injected in the next three months, will see Fort Concrete ramping up production of railway sleepers to allow for the rehabilitation of the railway line.

Mr Chimhandamba said other firms such as O’Connolly & Co (Pvt) Limited, Zeco Holdings, Dunlop, and granite suppliers, engineering workshops, electrical and instrumentation plants, among others, should be revived.

“NRZ will only be able to deliver a least cost, efficient and available infrastructure once it stops relying on imported goods and services.

“This means companies that used to supply goods and services to NRZ need to come back to life. We will only rest once these cluster industries and companies are operational and supporting NRZ.

“The impact will have a huge bearing on NRZ’s and Zimbabwe’s foreign currency dependency.

“Diaspora and Zimbabweans should have their eyes on these value chain industries as we recapitalise Zimbabwe’s infrastructure,” said Mr Chimhandamba.

The ramping up of railway sleepers’ production at Fort Concrete is also expected to see the revival of other companies such as Lancashire Steel.

Lancashire Steel, which produces steel, is understood to have secured an Indian investor, Whinstone Enterprises, and is expected to start operations soon.

The firm suspended operations in 2010 due to operational challenges largely associated with the closure of Ziscosteel, its biggest supplier of raw materials.

Apart from boosting production of rail sleepers at Fort Concrete, DIDG/ Transnet are also looking at other quick wins in signalling as they approach financial closure to bolster the interim solution.

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