NRZ deal: What’s going on?

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Dumisani Muleya

IN our front page in this edition, we report cabinet on Wednesday shipwrecked the National Railways of Zimbabwe (NRZ)’s US$400 million recapitalisation deal over funding, capacity and internal squabbles.

Editor’s Memo,Dumisani Muleya

Ministers debated the issue, but resolved to block the deal without any explanation given. In fact, there is still deathlike silence on what happened. The question arises: Is the deal dead or not? The public, whose expectations were raised by previous announcements on it, need to know what is happening.

Cabinet has to scrutinise such deals to protect the economic interest of the country and public funds. They are the policymakers and must assess such projects with the public or national interest uppermost their minds. In so doing they need to do a cost-benefit analysis; sum up the benefits and subtract the costs to see if it is a viable project.

Apparently Transport minister Jorum Gumbo presented a memorandum to cabinet seeking approval that NRZ should engage the Diaspora Infrastructure Development Group/Transnet consortium (DIDG/Transnet) on the project.

However, disputes seemingly arose over whether the consortium has the adequate financial and technical capacity to implement the deal. Such issues can easily be ascertained through due diligence, which must have been done before cabinet approval was sought.

It appears there are also political squabbles around the issue with factional and personal interests at play, although the genesis and structure of the deal has little to do with the current Zanu PF factional and succession dynamics.

While the minister steering the project is aligned to Vice-President Emmerson Mnangagwa’s faction, some of those opposed to the deal are also senior members of the same faction backing a different business consortium to come in. Some are South African-based Zimbabwean tycoons — with links to top ANC and South African government officials — scrambling to muscle in.

When assessed closely, it is a fight to eat. In an environment like this, factionalism becomes the expedient pretext and the trigger to block such projects, but digging a bit deeper reveals a business matrix which is not politically and factionally based, but financially grounded.

This is precisely the case with the NRZ deal; competing business and financial interests among ministers and other officials have muddied the waters. What appeared a simple and straightforward project is now a chaotic and complicated affair.

We were the first to question this deal, but after receiving documents it appeared sound and viable, although vested political and business interests in it could not be ruled out.

However, what is important is for government to assess and analyse the project and arrive at a professional decision not influenced by factional politics, personal squabbles or other self-seeking interests.

The background is that in April this year, cabinet approved NRZ’s recapitalisation proposal which sought to rehabilitate and modernise the current rail system and the construction of new railway lines to link the country to the Indian and Atlantic oceans. The recapitalisation plan was also aimed at speeding up the settlement of the loan repayment arrears to the Chinese government in order to unlock further investment from the world’s second largest economy.

At least 82 companies expressed an interest and submitted bids for the tender but only six bidders submitted full bids in compliance with the request for proposal before the deadline.

The six were China Civil Engineering Construction Corporation; Crowe Howath Welsa; Croyeaux (Pvt) Limited; Sinohydro Corporation Limited; Smh Rail Sdn Malaysia and DIDG/Transnet, which eventualy emerged as the winner.

On Wednesday Gumbo sought cabinet approval for NRZ to engage DIDG/Transnet in detailed contract negotiations, but ministers blocked the deal. Zimbabwe must create a good climate for investment. So government must go back and revisit the project — guided by the public interest — to see if it should go ahead or not.

In so doing, authorities must be careful to avoid throwing the baby out with the bathwater.

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