NRZ debt clearance strategy pays off

THE National Railways of Zimbabwe (NRZ) has made positive strides on its debt clearance strategy as it has cleared over $5 billion in pension arrears which had ballooned over the past few years threatening the survival of the parastatal.

The parastatal said the legacy debts, including those owed to statutory boards, have been reduced considerably.

So bad was the NRZ’s state of indebtedness that the Insurance and Pension Commission (IPEC) ranked it as the second worst in terms of pension debt when it released its name-and-shame list in 2022.

NRZ Public Affairs and Stakeholder Relations manager Mr Andrew Kunambura confirmed to Business Chronicle that the development was part of the new management’s thrust of clearing all legacy debts.

The progress in debt clearance has placed NRZ balance sheet in a favourable position to attract potential investors.

“The new management led by general manager Ms Respina Zinyanduko has made it a priority to clear all legacy debts. You will understand that on her appointment, she was charged with the responsibility to stabilise the company whose reputation was dented by several legacy issues, among them outstanding employee salaries, Zimra Paye and VAT, Zimdef, NSSA, Railmed and Pension Fund debts.

“This is in addition to a long list of foreign debts which threatened the survival of the business,” Mr Kunambura said.

He added: “NRZ no longer owes the NRZ Pension fund. The outstanding debt was accruing punitive interest and management took a bold decision to clear the debt for the benefit of both serving and former employees. All these debts were cleared using internally generated funds.”

Mr Kunambura said statutory debts have been cleared and the parastatals is now in a position to pay salaries on time.

“The general manager has demanded maximum effort from the management team and the results are starting to be realised with the debt clearance plan well on course.

“We are now getting to a point where the NRZ balance sheet gets attractive to potential investors. To date, NRZ has managed to clear most local legacy debts such as salaries, Zimra Paye, VAT, Railmed and other statutory obligations.”

“We have also managed to reduce foreign debts such as those owed to Hethimex and Portos e Caminhos de Ferro de Moçambique (CFM, Mozambique Ports and Railways).

“To put this into context, CFM was owed US$6 million and they were threatening to ban NRZ trains into Mozambique. However, this debt has been reduced to US$3,2 million. That has helped greatly to normalise our relations with CFM and we can now do business together in peace.”

On the operational side, Mr Kunambura said the parastatal committed a certain percentage of its monthly cash flow towards procurement of spares and rehabilitation of infrastructure while waiting for its several recapitalisation initiatives to bear fruit.

NRZ has in recent years been knocking on the doors of many potential investors, pitching various investment projects in an attempt to modernise its services and operations.
Against this background, the parastatal has engaged a number of investors, including from Turkey where a Memorandum of Understanding (MoU) was signed in 2021 with a company called Yapi Merkezi for the modernisation of NRZ’s rail system.

Under the MoU, the Turkish firm is expected to bankroll the project and provide expertise for repairing rail tracks across the country while also financing the acquisition of new coaches and wagons.

Contacted for comment, Ms Zinyanduko expressed satisfaction with the debt clearance progress saying the long outstanding debts had been hounding the company for many years.

“The debt was accruing punitive interest and was becoming unbearable for the organisation. All these debts were settled using internally generated funds. We could not have made it if it were not for these hard-working employees.”-chronicle