Afreximbank leads NRZ funding

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Tinashe Kairiza/Nyasha Chingono

THE African Export–Import Bank, Afreximbank, has been appointed by the Diaspora Infrastructure Development Group (DIDG) as the mandated lead arranger and co-ordinating bank to mobilise the US$400 million required for the National Railways of Zimbabwe (NRZ) recapitalisation project, the Zimbabwe Independent has established.

The game-changing move came this week ahead of the August 14 deadline for the expiry of the framework agreement of the deal involving NRZ and a consortium comprising DIDG and South African rail, port and pipeline company, Transnet.

The framework agreement was extended by six months from February 14 during the Zimbabwe-South Africa Bi-national Commission meetings in Harare in March, with the strong support of Foreign and International Trade minister Sibusiso Moyo.

Information obtained from governemnt and NRZ officials, as well as documents seen by the Independent, show the engagement of Afreximbank on the project was agreed upon this week and is expected to add implementation momentum into the process.

Details show Afreximbank will provide US$100 million for the NRZ revival project and co-ordinate funding from a number of regional banks which have given indicative term sheets. The syndicated funding totals between US$700 million and US$1 billion.

According to the initial financing term sheets, seen by the Independent, Standard Bank was ready to shell out between US$100 million and US$137 million, Absa (US$200 million), Nedbank (US$200 million) and Nedbank Zimbabwe (US$17,5 million) and the Industrial Development Corporation of South Africa (US$100 million).

Ecobank Kenya had also expressed interest to channel US$100 million towards the project, while Trade and Development Bank (TDB), formerly PTA Bank, would provide US$75 million.

Latest information shows the term sheets submitted to NRZ by DIDG this week indicate Afreximbank will provide US$100 million; TDB US$75 million; Standard Bank US$317 million (minimum hold US$100 million); Absa US$200 million (minimum US$50 million) and Nedbank US$200 million (minimum US$50 million).

Local financial institutions will also contribute. Some of the institutions which have indicated interest in the project include Old Mutual, Imara Asset Mangement, ZimRe Holdings, Steward Bank and the National Social Security Authority. CBZ Bank was also initailly interested in the project.

A senior government official told the Independent yesterday that Afreximbank has now taken the role of the lead bank and co-ordinator.

“There has been a letter of engagement sent to NRZ this week showing that DIDG has appointed Afrexim as the mandated lead arranger and co-ordinator of the process to raise US$400 million for the project,” the official said.

“This is a major development because it means we now have the money on the table to implement the project and resusciate our rail network. This has been long overdue and remember the project was officially launched by the President (Emmerson Mnangagwa) last year; so it has to work. Besides, this is a big project which can become an economic enabler and it has to succeed for our economic programme to materialise.”

NRZ spokesperson Nyasha Maravanyika expressed ignorance on the involvement of Afreximbank in the long-drawn-out deal, saying the national carrier was awaiting finalisation of negotiations between the parties to the multi-million recapitalisation arrangement.

“All we know at the moment is that there are negotiations in all areas to make the deal work. We are waiting to see what ground the parties in the negotiations have covered,” Maravanyika said.

Afreximbank regional director Humprey Nwugo declined to comment, referring questions to DIDG. DIDG chairman DIDG chairperson Donovan Chimhandamba yesterday said his company and its partners were now ready to move into implementation stage upon the completion and signing of the necessary agreements.

“Afreximbank is now the mandated lead arranger and bank co-ordinator for the project. This means all banks involved will be syndicated through Afrexim which will contibute US$100 million from its own facilities,” he said.

“The next critical step will be signing of the Joint Venture Agreement (JVI) with NRZ that will allow us to officially constitute the New Concession Company (JV2) into which the recapitalisation funds will be channelled.

There is a lot of corporatisation work which lies ahead and we will now need all hands on the deck during the implementation phase. But now we are ready to go.”

In terms of the structure of the deal, DIDG and Transnet came together in a 50-50 arrangement to form (JV1) which partnered NRZ to form JV2, under which the DIDG/Transnet consortium has 60% shareholding and NRZ 40%.

Initially, the funds were meant to be released to JV1 to ensure the money is under the control of the South African-based consortium because of high country risk, but under the new arrangement the funds will be released to JV2.

Transport minister Joel Bigge Matiza in May told parliament in Harare that the South African-based consortium, which won the bid to revamp Zimbabwe’s dilapidated rail network in 2015, was struggling to secure funding for the NRZ despite being shown indicative term sheets at the time.

Matiza yesterday said government was still waiting for proof of funding from DIDG.

“I am not aware of that. We are waiting for DIDG to provide proof of funding and then we get on with it,” Matiza said.

However, Chimhandamba said DIDG has managed to pool resources together from a number of banks and even ended up with the project virtually oversubscribed.

“We are delighted that banks, led by Afrexim, have shown confidence in the project which comprises recapitalisation, rehabilitation, maintanence, operation and management of Zimbabwe’s railway system,” Chimhandamba said.

“As you would be aware, Zimbabwe strategically links the south and north regional rail corriors, and covers a length of 3 077km, of which 360km is currently managed under the Beitbridge-Bulawayo concession owned by a Grindrod subsidiary (NLPI) and NRZ.

“So this is an important project for Zimbabwe and the region. NRZ used to transport 14 million tonnes on average with a peak traffic of 18 million tonnes. Things changed with economic decline and lack of investment, so we are trying to help to revive the rail system for the good of the economy and the region.”

Official sources said receiving documents showing that Afreximbank is now leading the fund-raising process and proof of funding, NRZ and all the parties will now have to move to finalise the legal agreements and commnce full implementation.

The project has already been unfolding with the provision of an interim rolling stock solution which comprises 14 new-age locomotives, 200 high-side wagons and seven passenger coaches. The solution structure entails full lease of rolling stock at below market cost, leveraging existing interchange agreement between Transnet and the NRZ, and provision of spares, support and maintenance for leased fleet.

As a result, this has increased passenger and freight volumes where interim solution rolling stock is operating and improved the NRZ revenues resulting in the struggling rail utility moving from paying 50% of employees’ salaries to paying around 90% levels.

The interim measures also include the rehabilitation of railway sleepers locally. NRZ requires 200 000 sleepers annually to meet regular track maintenance requirements.

Due to interim measures, NRZ will resume placing sleeper orders with Fort Concrete. The envisaged US$10 million recapitalisation of Fort Concrete in a joint venture deal between Aveng Infraset of South Africa and DIDG will speed up the revival of the NRZ whose rail network covers 3 077 kilometres.

In the 1990s, NRZ used to transport over 14 million tonnes with peak traffic scaling 18 million tonnes per year in 1995. However, the dramatic decline of Zimbabwe’s economy over the past two decades hit NRZ hard and left it reeling, only able to move 2,7 million tonnes a year.

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