Broke NRZ seeks US$650m

NATIONAL Railways of Zimbabwe (NRZ) employed more than 20 000 employees in the 1990s. However, following extended years of mismanagement and corruption, the company, saddled with a US$144 million debt, has become a pale shadow of the giant it was. NRZ now employs just 5 700 people and will soon retrench more than 1 000 workers. Our reporter Hazel Ndebele (HN) this week interviewed NRZ board chair Larry Mavhima (LM) on the challenges the company is facing and what needs to be done to get it back on the rails. Below are the excerpts:

NRZ board chair Larry Mavhima
NRZ board chair Larry Mavhima

HN: NRZ has gone down over the years and needs serious recapitalisation. How much does it need to recapitalise?

LM: The global figure we need right now in order to get NRZ where it was before is US$650 million. This is not money that we are saying should come in all at once. As NRZ and the board we have adopted a position where we will implement a bite-size approach, which basically means we will not take more than we can chew. We will recapitalise NRZ in phases and in terms of what our greatest need would be.

We are looking into bringing between 800 to a 1 000 brand new wagons and between 30 to 50 brand new locomotives as we recapitalise. We would also want to get an efficient railway system to ensure that the permanent way is in good rail worthy condition.

We would attend to what we call the centralised train control system which would enable us to monitor the movement of a train within a distance and be able to communicate with it, for example, you can slow down the train when it is moving too fast or stop it in times of danger. At the moment we are using the GPS-based train system.

HN: What happened to the Development Bank of Southern Africa (DBSA) loan to NRZ?

LM: Contrary to what most people say that we have dropped the DBSA loan, it is actually still under consideration. The board has agreed that we want a structured transparent, fair way of dealing with any potential financiers and investors. We have actually appointed a transaction advisor, Deloittes and Touche, to evaluate and adjudicate tenders by various companies.

HN: Are there any plans for Public-Private Partnerships (PPPs) or joint ventures to resuscitate NRZ, and if that is the case, who have you talked to so far?

LM: Yes, we already have PPPs and mostly with local companies. We have a lot of people who have expressed interest in different areas and they include the Chinese, Egyptians, Europeans and even Zimbabweans. This shows us that NRZ is an attractive investment opportunity.

On Friday last week we held an annual general meeting where we agreed on project information memorandum (PIM), which states what we would like to see as NRZ. We agreed that by mid-August we will do a Request For Proposals (RFP) where all those interested in the running of NRZ whether they are the operators, financiers or investors they will come and do a due diligence on NRZ and they will prepare their documents based on PIM.

We are giving everyone a chance, including DBSA. There will be a start date and a closing date for a period of two months. After all that is done management and the transaction advisor would then adjudicate proposals and make a recommendation to the board.

HN: What capacity does NRZ have when fully operational?

LM: NRZ used to carry 18 million tonnes of goods per year, but now we are only carrying three million. Last year we lost money on the passenger trains and what we are saying is that priority right now is carrying as much goods as we can before we move into introducing your bullet trains.

We are engaging government to introduce a policy where certain goods should only be transported by rail. These are goods such as coal, granite stones, chrome and most of the minerals.

HN: NRZ has proposed to retrench between 1 000 to 1 400 workers, so when are you going to carry out this exercise?

LM: As soon as the auditor-general is done with the forensic report we will carry out the exercise. The audit will help us in terms of the optimum number we will need to get rid of and in which areas; the numbers could actually be more than we have estimated. It needs to be done because the enterprise cannot continue to carry people it cannot afford to pay.

HN: Where is NRZ going to get the money to pay retrenchment packages as it is broke and over a period of how long?
LM: As I mentioned earlier we are restructuring the balance sheet which will help us fund such and also as when we do get an investor we will factor that in to see how we can streamline the organisation.

HN: What vision does your board and management have for NRZ?

LM: Obviously, the vision is to see the successful turnaround of the parastatal into a viable business entity at the earliest of possible time. Our vision is to be a key player in terms of the economic turnaround of Zimbabwe and also being a key player in the Sadc region thus having countries that feed into NRZ and NRZ feeds into in order to see regional economic growth other than our own economic growth.

HN: Can this vision be achieved given that NRZ is saddled with a US$144 million debt and owes workers more than US$68 million in outstanding salaries?

LM: It is going to be achieved definitely, but not over night because of issues such as huge debts chunk. We are looking at possible ways of restructuring the balance sheet; we want a solid balance sheet which will allow growth of the enterprise.

The restructuring of the balance sheet would possibly entail government assuming some of the debt especially the legacy debt, those loans and outstanding debts that are owed to government. We have already submitted a paper to government to ask that these debts be absorbed and our Ministry is engaging the Ministry of Finance to achieve that goal. This will make our balance sheet attractive for potential investors.

HN: There are talks that NRZ wants to privatise, may you kindly comment on that.

LM: Look, the NRZ is already privatised; we have Bulawayo-Beitbridge Rail (BBR) run by a private company. We are looking into privatising in terms of operations however privatising has to be in terms of the shareholder (government).