STATE-OWNED National Railways of Zimbabwe (NRZ)’s future hangs in the balance after auditors cast doubt on the company’s ability to continue operations.
NRZ is unable to meet its short-term liabilities and is weighed down by operating inefficiencies that have cost the company hundreds of millions over the years, independent auditors Grant Thornton Chartered Accountants said in the company’s 2014 financials.
The auditors said NRZ’s perennial losses and net current liability position casts doubt on the company’s status as a going concern.
The auditors drew attention to the fact that NRZ was in a net current liability position of US$131,1 million compared to US$108,8m in 2013 and also incurred a net loss of US$31,6m, from US$49,1m in 2013 to contribute to a cumulative loss of US$235,5m.
“This cumulative loss and net current liability position, along with other matters as set forth in Note 27 indicate the existence of a material uncertainty that may cast significant doubt over the national railways’ ability to continue as a going concern,” said Grant Thornton.
The parastatal’s board of directors, then led by axed chairman Alvord Mabena, insisted the railway operator remains a going concern.
“The directors have assessed the ability of the railways (NRZ) to continue operating as a going concern and believe that the preparation of these financial statements on a going concern basis is still appropriate,” said Mabena in the company’s 2014 annual report.
However, Mabena said the directors believed that under the current economic environment, a continuous assessment of the ability of NRZ to continue to operate as a going concern would need to be performed to determine the continued appropriateness of the going concern assumption that has been applied in the preparation of the 2014 annual financial statements.
Mabena noted that the company was in a rut and pinned hopes of turning its fortunes on securing technical and financial partners.
“The future of NRZ is entirely dependent on the realisation of the current efforts to identify a suitable financing partner in the recapitalisation of the company and, in this regard, I am convinced that government, through the Ministry of Transport and Infrastructural Development, is speedily attending to this very urgent matter,” said Mabena.
A five-year summary of the company’s financial performance shows an inefficient model where all revenues are chewed up by a huge cost structure to a point of deficit.
In 2014, operating revenues for rail services stood at US$91,2m while operating expenses amounted to US$103m, indicating an operating deficit of US$11,8m. After factoring in other income amounting to US$13,9m and other expenditure amounting to US$44,1m, NRZ reported a net loss position of US$431,6m in 2014.
The highest operating deficit in the five-year period, between 2010 and 2014, was recorded in 2012 at US$30,7m while the least was in 2010 at US$1,3m.
On passenger services, NRZ revenues stood at US$3,2m while expenses amounted to US$10,9m to give a deficit of US$7,8m.
In 2013, the passenger unit reported a deficit of US$6,4m.
An analysis of revenues and expenditure shows that under rail services, NRZ earned an average US$35,48 per train engine kilometre while it spent on average US$40,08 per train engine kilometre making operations unsustainable.