CABINET on Wednesday shipwrecked the National Railways of Zimbabwe (NRZ)’s US$400 million recapitalisation deal over funding, capacity and internal squabbles, it has been established.
By Bernard Mpofu
Transport minister Jorum Gumbo had presented a memorandum to Cabinet seeking approval that NRZ should engage the Diaspora Infrastructure Development Group/Transnet consortium (DIDG/Transnet). High-level sources said disputes emerged over whether the consortium has the financial and technical capacity to implement the deal.
“There also political squabbles around the issue with factional and personal interests undertones although the genesis and structure of the deal has little to do with the current Zanu PF factional and succession dynamics,” a source familiar with the developments said.
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.
Following of the recapitalisation plan, 82 expressions of interest were submitted to government and 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 eventually emerged as the winner.
This process was overseen by an adjudication team composed of 12 adjudicators and 11 observers who were drawn from the Ministries of Transport and Infrastructural Development, Finance and Economic Development, State Enterprises Restructuring Agency, NRZ Trade Union representatives and NRZ officials.
Under the proposed recapitalisation structure, DIDG/Transnet proposed the establishment of a joint venture company to be incorporated in Zimbabwe comprising DIDG/Transnet and NRZ with a shareholding structure of 65/35% respectively. The JV was tasked for rail operations and recruitment of staff. The state-owned locomotive operator, NRZ would retain ownership of all assets and lease to the JV those assets in return for royalty fees.
The JV had also proposed a contract period of 25 years based on an initial 16-year period for loan repayments, while the remaining nine years would allow a reasonable return on investment. Government had envisaged that the deal would among other reasons improve NRZ’s ability to borrow funds without the need for sovereign guarantees; retire NRZ warehoused legacy debts, as well as clean and shore up the balance sheet. The recapitalisation proposal was also seen as a way of maximising use of facilities and spares, utilisation and up-skilling of staff, as well as a key enabler of economic activity.
Once the deal was finalised, Gumbo wanted the consortium to re-negotiate the shareholding structure to ensure a win-win situation.