NRZ appeals to Government to take over legacy debt

THE National Railways of Zimbabwe (NRZ) has implored Government to take over its legacy debt estimated at US$23 million as it continues to have negative knock-on effect on its balance sheet and has the potential of driving away potential investors.

The parastatal noted that illegal sanctions imposed by Western countries continue to undermine operations as it is finding it difficult to procure spares and equipment.

About 90 percent of the equipment is imported and the original equipment manufacturers of such spares and equipment are resident in those countries that imposed sanctions.

Government has acknowledged that the legacy debt is an albatross to NRZ progress and has made a commitment to assist in revamping the rail transporter.

This came out during the parastatal’s annual general meeting held in Bulawayo yesterday.

In his 2021 annual report statement NRZ board chairman Advocate Martin Dinha noted that in the period under review, NRZ realised a comprehensive profit of $277 billion compared to a net loss of $3,4 billion in the prior year.

“The favourable position was due to the fair value gain on property and equipment realised after carrying out the asset revaluation exercise,” reads part of the report.

However, he noted that cash inflows generated were insufficient to meet the organisation’s obligations in the accumulation of creditors’ balances.

“The balance sheet position continues to be affected by conversion losses emanating from legacy foreign loans that were taken by the organisation in the 1990s.

“We continue to implore the shareholder to consider taking over this foreign debt because it continues to have a negative knock-on effect on our balance sheet,” he said.

“NRZ continues to rely on supplier market mainly composed of third party/agents who sell the required spares at exorbitant prices, with long delivery times which affect plans to address the availability and reliability of locomotives due to serious maintenance backlogs hence affecting the overall performance of the organisation,” said Advocate Dinha.

Deputy Minister of Transport and Infrastructural Development, Mike Madiro agreed that the legacy debt was an albatross to NRZ progress.
He however said Government was committed to assist in revamping the NRZ .

“In terms of strategy, the last time we were here, we applied our minds on the transformational factors to propel the logistics and rolling stock company in line with the Government’s Vision 2030. We identified legacy issues as an albatross to NRZ progress.

Ms Respina Zinyanduko

“During the last AGM, the task for the NRZ board was to restructure, revamp and streamline the convoluted structure to come up with a leaner structure but fit-for-purpose structure. I am happy to learn that the company has made huge strides to clear some of its domestic legacy debts and cleared salaries arrears,” Deputy Minister Madiro.

He commended the parastatal for clearing salary arrears.

“I am told $326 million then equivalent to US$3,8 million was paid to clear the salaries arrears. This has restored industrial harmony as salaries are now up to date since September 2021,” said Cde Madiro.

He said Government wants the NRZ to reclaim its position as the main transporter of bulk goods from companies and mines.

“The objective is to improve the rail infrastructure quality index to 68 percent by 2025 from the current 57 percent and increase freight volumes to 6,7 million tonnes per annum from the current 2,3 million tonnes as well as increase passenger services.

The Government is eager to see the success of NRZ and hence our emphasis to make good the NRZ vision: to be the dominant logistic player in the region by 2030,” said Dputy Minister Madiro.

NRZ general manager Ms Respina Zinyanduko said the legacy debt started accumulating in 2005 when infrastructure vandalism kicked in.

“We owe about US$23 million on electrification. The loans were used to buy electric locomotives for the Dabuka- Harare line. Part of the loans were repaid. We started failing to pay in 2005 when the railway lines started to be vandalised,” she said.

On the recapitalisation front, Advocate Dinha said the focus is to raise an initial capital of US$86,4 million through regional development banks to support Phase One of the NRZ strategic plan with subsequent phases being implemented in line with business growth.

“The recapitalisation programme is based on off-balance sheet cashflow backed financing. The foreign currency income generated from exports/ imports business shall be ring-fenced towards servicing the funding facility.

“The entity is currently in discussions with banks who have shown interest in financing procurement of locomotives and infrastructure rehabilitation to improve the entity’s operational capacity.”

Advocate Dinha said while the parastatal was faced with operational challenges characterised by slowdown in world trade and disruption in global supply chains, it was gratifying that the new dispensation under President Mnangagwa’s engagement and re-engagement efforts has presented several opportunities for growth which it continues to pursue.

To that end, he said the parastatal’s outlook is bright.

“The outlook is positive as the shareholder has shown a new interest to support NRZ and seeks to benchmark major strides and developments towards realisation of an upper middle income economy by 2030,” reads part of the report.

Adv Dinha added that the critical role of NRZ as an economic enabler will entail increasing capacity of freight from the 2,5 million tonnes to 6,5 million tonnes by 2025 as well as passenger train services.

Ms Zinyanduko noted that in the period under review, NRZ operations remained resilient in a turbulent macroeconomic environment characterised by constrained supply chain logistics.

On financial performance, she said the parastatal’s inflation adjusted earnings for 2021 was $7,2 billion compared to $7,04 billion earned in the prior year.

“The inflation adjusted expenditure was $10,532 billion versus $12,201 billion for the prior year. However due to monetary gains and fair value gains, the company posted a comprehensive profit of $289.284 billion.”-chronicle