a fortnight ago Cabinet approved a proposed $400 million deal to recapitalise the National Railways of Zimbabwe (NRZ).
The deal that involves the Diaspora Infrastructure Group Development Group (DIDG) and South Africa’s Transnet raises hopes that the sleeping giant is about to awaken. NRZ chairperson Larry Mavhima (LM) last week told our reporter Blessed Mhlanga (BM) in an exclusive interview that the Cabinet approval was a potential game-changer. Below is the full interview.
BM: You finally got a Cabinet nod for your $400 million deal with DIDG and Transnet. What does this mean for the parastatal?
LM: We are very happy as NRZ and as chairman that Cabinet in its wisdom has seen it proper and appropriate to approve the proposal that we had sent to them for clarification and approval for us to negotiate with the DIDG-Transnet Consortium.
The next step that we are going to take now is to call all parties to the table so that we start the necessary negotiations that we want to carry out and come out with concrete agreements within that structure that will then be forwarded to the joint venture committee.
The committe will also review the agreements that we will have made with DIDG-Transnet and then pass on those recommendations to Cabinet for final approval.
BM: So the deal still has to go back to Cabinet for final approval?
LM: Yes indeed, what we submitted to Cabinet, which was approved, was merely a summarised version or concept of the structure, but when we now go back to Cabinet we present specific contract agreements, to say these are the royalties that will be paid to NRZ. It will have its own conditions, rates and how long it will take.
We will have an access fee agreement, this is what the joint venture will pay into NRZ for a period of time, this is the split of the revenue, whatever percentage that will have been agreed on.
Those are the various specific agreements that we will be drawing and will be verified by the joint venture committee to see that they comply with the laws of the country. Cabinet will then look at that and give its greenlight, if they are satisfied.
BM: When do you expect to go back to Cabinet for this final approval?
LM: After two and half weeks the deal will be back in Cabinet.
BM: What is your turnaround time for us to see the fruits of the deal?
LM: Fortunately, Cabinet is familiar with this deal now and I am sure by the time it goes through the joint venture committee, which is probably another week to two weeks, we believe that Cabinet will immediately accede to the recommendations that we will have put [in place].
Thereafter, it will be signatures of the agreement and as far as we have been advised by the consortium, it will take two weeks for them to start implementing the project.
BM: How long are you going to be working with DIDG-Transnet, so that we have clarity on the nature of this deal.
LM: It’s basically a Build-Operate-Transfer deal with the proposal that it runs for 25 years, thereafter the partners can exit and NRZ will remain on its own, or we can extend the partnership if we want to open up new corridors, modernise the railways and introduce fast commuter trains for instance, open up new corridors, like for instance the Lions Den to Kafue route, which will significantly cut the amount of time it takes to get into Zambia.
BM: Let’s look at the management structure after this deal, is anyone going to be fired?
LM: Look, this is a joint venture, meaning there is going to be fusion of management as people that are going to be bringing in a significant amount of capital would want to have some of their people in senior management and it also means that some of our management might have to be redeployed elsewhere or retired.
It’s a natural process whenever you have a joint venture agreement. We are hoping that the management that will run the new NRZ will be an efficient, responsive management that will put the interests of the organisation and country at the forefront.
BM: When are we likely to see new tractive power and upgraded railway systems in Zimbabwe?
LM: If everything goes according to plan, I would say by December 15, but I would say definitely by the beginning of the year.
BM: How does this deal help your long-suffering workers?
LM: We have a separate structure with the workers.As you know, we have received approval from Cabinet to warehouse the debts that we owe the workers.
Basically, what it means is we are going to get some funding from government, which will enable us to pay the workers. Then after that, NRZ will repay the government from the royalties and access fees that it is going to get from the joint venture.
BM: One of the biggest challenges faced by NRZ is failure to pay its workers, can you give us an update.
LM: We are better off than where we were before. At least we are still managing to pay the workers what we agreed to pay, but with the cost of living going up, prices shooting up, as they have been without any justification, that naturally puts pressure on us, on workers, on everybody because that erodes disposable income. So we are looking at ways of ramping up our traffic so that we are able to generate more revenue so that at least we maintain, if not slightly increase, what we are paying the workers at the moment.
BM: And what is it that you are paying workers at the moment?
LM: We are paying our workers from 50% to 60% of their current salaries.
BM: NRZ is also saddled with debts, has there been any movement on that front to extinguish the debts?
LM: We have had negotiations with the ministry of Finance so that they can warehouse some of the debts for us.
They have agreed and this issue was taken to Cabinet and was approved. so we are actually in the process of effecting the warehousing of those debts and that will come in as an effective relief not only to the workers, but also to the organisation once we start implementing that warehousing.
BM: How much of your debt do you want warehoused by government?
LM: The total debt owed by NRZ is $348 million, but again I need to clarify that the warehousing is different from the debt takeover by the government. We are not saying the government should take over the debt, we are just saying ‘can you warehouse the debt for us so that we have a clean balance sheet’?
We need to be allowed to recapitalise the business without the legacy debts and we want to provide government with a repayment plan on how we will be able to repay those debts. So far, that is something that is advanced in terms of implementation. We see that as another solution to the current financial predicament we have at NRZ.
BM: You spoke about ramping up traffic, what traffic are you currently moving?
LM: We are budgeted to move 3,1 million tonnes this year up from 2,7 million tonnes last year and right now I would say that we are on the ball. We will be able to achieve our goal of 3,1 million tonnes this year. We have new companies that are setting up in Hwange; we have Hwange Colliery significantly improving its output, and we have Zimasco, also significantly improving its output to the extent that at the moment we actually have a capacity deficit in terms of our locomotives and our wagons.
Given the necessary support, such as the warehousing of the debt, we will be able to come out of the doldrums.