NRZ US$400 million deal ‘dead in the water’

By Africa Moyo and Darlington Musarurwa

The US$400 million deal between the National Railways of Zimbabwe (NRZ) and DIDG/Transnet is effectively dead and buried and Government might soon re-tender the project, a Cabinet minister has revealed.

Minister of Transport and Infrastructural Development, Dr Joram Gumbo
Minister of Transport and Infrastructural Development, Dr Joram Gumbo

This comes as some stakeholders tried to salvage the deal last week.

Though the local partners of Transnet, the Diaspora Investment and Development Group (DIDG) had secured letters of commitment from South African banks to fund the transaction, it emerged that Government was mainly sceptical of the financial health of Transnet, including its recent controversy in neighbouring Botswana, where it reportedly did a shoddy job.

The Minister of Transport and Infrastructure Development, Dr Joram Gumbo, told us that Government has concluded that the proposed deal is not good for the country.

“The NRZ deal went to Cabinet and was rejected, you must have gotten that information.

“The deal didn’t go through. When it was assessed, it was found out that it was not good for the country,” he said.

Pressed to explain why the deal was rejected, Dr Gumbo noted that “Cabinet deliberations are not publicly discussed”.

However, it has since been established that Cabinet unanimously concluded that awarding the tender to DIDG/Transnet was a risky undertaking for the country.

Sources believe that the South African parastatal wanted to use the deal as leverage to borrow money from China.

“That is where the problem is. It (Transnet) does not have the money and some locals are the ones who looked for money on behalf of the company.

“Remember that this deal started during the time when Dr Obert Mpofu was still the Minister of Transport and Infrastructure Development. Even during the Dr Mpofu era, DIDG/ Transnet said ‘if you give us the tender, we will get money from China’ and most ministers said it would be ridiculous to allow a company to borrow money from somewhere then come and try to sell us that money again,” said a source close to the deal who requested anonymity as the issue is still sensitive.

“It was therefore suggested that we can just borrow money from China on our own to avoid interest on interest (compound). So Cabinet was not happy with the deal.”

But it is Transnet’s controversial deal with Botswana last year that has been the most damaging.

Botswana Railways (BR) ordered 30 coaches from the South African firm, and most of those that were eventually delivered had technical hitches.

There was also controversy on the way the deal was structured.

While Transnet claims that it managed to clinch the Botswana deal through a competitive bidding process, which essentially opens up the process to many participants, it has since emerged that it, in fact, was chosen from a selective tender process that was facilitated by an unnamed businessperson.

All this has since cast doubt on the ability of the South African state-owned enterprise to meaningfully contribute to the local project.

“Transnet did not do other jobs well in the past. In Botswana, they are said to have messed on a wagons deal, where they claimed to have supplied new wagons and on commissioning, they could not work and it was found out that they were old,” added the source.

Transnet could not be reached for comment by the time of going to print.

Dr Gumbo, however, indicated that going forward, Government “will look for new investors” to revive NRZ.

But there are fears that the abortive NRZ deal will naturally dampen investor interest in the asset.

It is even made worse by the failure of the Ziscosteel deal, where a deal with Indian firm Essar was stillborn.

Dr Gumbo disagrees: “Those who say the deal will have a bearing on investors can say so but when you have been given a tender, the devil is in the detail. When you inspect issues to do with repayment terms, interest rates, how the money will come, and the conditions precedent and so on, you end up abandoning the winner of a tender.

“So when one is awarded a tender, it does not mean the project is all yours, there would be lots of issues that have to be checked. We need to establish what exactly is being bought.”

Although there are indications that the deal is doomed, discussions are still continuing between the parties involved, with the hope that it can still be salvaged.

Government is currently on a mission to restructure State-owned enterprises as they are viewed as a key enabler to economic growth.

NRZ, Air Zimbabwe, Ziscosteel and the Civil Aviation Authority of Zimbabwe (CAAZ) are some of the parastatals that Government is keen to revive.

Already, Cabinet has approved a plan to assume legacy debts close to US$1 billion that the selected parastatals have chalked up.

NRZ has a legacy debt of US$348 million.

A new law — the Public Entities Corporate Governance Bill — also seeks to facilitate the efficient management and administration of public entities.

If the NRZ deal had sailed through, it is believed that the rail operator would have been set on a path of sustainable recovery. The Sunday Mail