Ministers derail NRZ revival

Ministers derail  NRZ revival
Transport and Infrastructure Development Minister, Joram Gumbo, expressed concern over Zinara’s relationship with Univern.

Transport and Infrastructure Development Minister, Joram Gumbo.

THE $400 million deal to recapitalise the National Railways of Zimbabwe has been thrown into jeopardy, after rival suitors for the parastatal, fronted by Cabinet ministers, launched a last-minute bid to abort the transaction.
The ministers are pushing for the involvement of China Railway Eryuan Engineering Corporation (CREEC), which did not participate in the bidding process and Sinohydro, which took part in the tender but lost out. CREEC signed an agreement with NRZ for railway network planning and rehabilitation of four corridors, including the supply of traction and rolling stock and other equipment in May 2015.
The company undertook a feasibility study which initially put the project cost at $750 million. The figure was subsequently reduced to $324 million.
The derailment of the NRZ’s revival programme risks damaging and expensive litigation for government should it decide to cancel the tender. The country also stands to lose its strategic geographical advantage which makes it a potential regional hub.
As President Robert Mugabe’s government bickers and dithers over the rail project, Zimbabwe’s neighours are investing in networks to bypass the country.
On Zimbabwe’s western border, Botswana is pursuing a $260 million road-rail link with Zambia, while the African Development Bank (AfDB) is funding Mozambique’s Nacala rail project, to link that country with Malawi and, potentially, Zambia by extension.
The Diaspora Infrastructure Development Group (DIDG) — a consortium of 500 non-resident Zimbabwean professionals — in partnership with South Africa’s Transnet, was last month announced winner of the NRZ recapitalisation tender.
However, multiple sources told The Financial Gazette this week that Mugabe’s Cabinet has held back signing off on the deal after spirited opposition led by Information Communications and Technology Minister, Supa Mandiwanzira, Macro-Economic Planning and Investment Promotion Minister Obert Mpofu and Labour Minister Prisca Mupfumira.
Transport Minister Joram Gumbo, who sought Cabinet approval for the deal last week, failed to defend it against the onslaught from ministers opposed to it.
“After a sustained onslaught, mainly from the trio, Gumbo failed to defend the transaction,” one source said.
“This prompted the President to ask the minister to go back and review.”
Another source said ministers opposed to the DIDG-Transnet-NRZ deal raised three main issues — financial and technical capacity as well as a five percent royalty payment due to the government of Zimbabwe annually, for the duration of the 25-year project.
“This is despite the fact that the tender documents bear evidence of availability of funds and financial backing from major South African bank, Standard Bank, Rand Merchant Bank, Nedbank and development financier, Industrial Development Corporation,” the source said.
Documents seen by The Financial Gazette show that the institutions’ financial backing for the transaction exceeds $1 billion, far more than the scope of the NRZ recapitalisation.
“It was evident, early on, Minister Gumbo was not sufficiently prepared to make the case for this transaction. In the end, he came just short of disowning it.”
Apart from enjoying the technical expertise of Transnet, DIDG, is led by professionals currently involved in billion-dollar deals in South Africa and east Africa.

Minister of Information and Communication Technology (ICT), Postal and Courier Services, Supa Mandiwanzira

Minister of Information and Communication Technology (ICT), Postal and Courier Services, Supa Mandiwanzira

Mpofu, a former transport minister weighed in, saying an abortive deal between NRZ and the Development Bank of Southern Africa (DBSA) had been a better proposition. 
The $700 million DBSA loan deal, which fell through a few years ago, was priced at 16 percent, according to officials with inside knowledge of the discussions. Funding for the DIDG-Transnet-NRZ deal is understood to be at about 6,5 percent interest.
“The five percent royalty clause deliberately misrepresented as a purchase price by opponents of the deal is just a structure put in place to clear the NRZ’s historical debt, mainly salary arrears,” a source said.
Ministers opposed to the DIDG-Transnet-NRZ deal are reportedly doing the bidding for a rival group led by a non-resident indigenisation proponent and banker, who is understood to have tried to lobby Transnet to drop DIDG.
The ministers want government to rope in the China’s CREC and Sinohydro. Well placed sources said CREC wanted to be awarded the tender without submitting a bid.
They added that government exposed itself to the risk of damaging and expensive litigation if it moved to cancel the tender.
Chimhandamba said his consortium remained committed to the transaction, but declined to comment further.
Gumbo declined to comment when contacted for this story.
NRZ chairman Larry Mavima yesterday confirmed that the transaction was under review, but declined to give details of Cabinet’s decision.
“Cabinet issues are confidential, so for now it will be difficult for me to comment.
“But I can tell you that there were some questions regarding the structure of the Transnet/DIDG deal and certain financial capacity,” Mavima said.
“Cabinet has now asked the minister to go back and verify the capacity. I believe the shareholder is right to question the capacity of the winner. I, however, hope this is not a situation where a golden opportunity can be missed.
“We are hoping to submit clarifications soon so that government can reconsider its decision because this was the best opportunity for NRZ. This was going to revive the economy as it would benefit from cheaper transportation for goods.”
Zimbabwe Congress of Trade Unions secretary general, Japhet Moyo said government should not let the NRZ deal collapse, as it has brought renewed hope to the rail company’s estimated 5 000 employees, collapse.

Macro-Economic Planning and Investment Promotion Minister Obert Mpofu

Macro-Economic Planning and Investment Promotion Minister Obert Mpof

Citing the $750 million to revive Zisco, which suffered a stillbirth a few years ago, after India’s Essar walked away Moyo said: “This would not surprise us if the deal does not materialise because the culture has not changed. It’s a disaster for the economy and for the workers who are owed millions of dollars because they were starting to see light at the end of the tunnel.”
The DIDG-Transnet consortium emerged winners after one of the most transparent bidding processes conducted by the State in recent times.
There were five other bidders vying for the NRZ revival, namely China Civil Engineering, Sino Hydro, accountancy firm Crowe Horwath & Welsha, SHM Railway of Malaysia and Croyeaux Limited of Zimbabwe.
The adjudication process was overseen by an adjudication team comprising members from the Ministry of Finance and Economic Development, the Ministry of Industry and Commerce, the Office of the President and Cabinet, State Enterprises Restructuring Agency and NRZ.
The NRZ board also engaged Deloitte as a transaction advisor.
newsdesk@fingaz.co.zw

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  • silungisn

    All ZANU Ministers are distructive….thus why Zimbabwe is on its knees….including Mugabe as well….

  • Wilson Magaya

    The saddest part of this is that we are once again undermining our own people’s efforts to grow the economic pie. The issues raised are tragic in that they are tantamount to hiding behind one’s own fingers or stuffing one’s head into the sand. MOST IF NOT ALL FOREIGN INVESTORS come with an airfare, hotel money and a few dollars to tell a compelling story. They get more ear because they are foreign. Most have the support of their governments to prove that they have the money to invest. Its just a promise and in reality there is no money. They get an MOU with GoZ and then take that to any bank on earth and have money once they prove that they have a deal on the table with Government of Zimbabwe that gives them access to this asset or that. We are mortgaging our country and the future of our children through short sightedness……

    Our people unfortunately DO the opposite. We stump any progress by our own to bring networks of investors and instead put our TRUST in foreigners to do that for us. Tragic indeed and sad at the same time because without the participation of the People of Zimbabwe regardless of where the are we will never see our PIE grow and so we will continue to fight over crumbs. This makes me wonder who the true patriot is…

  • Matsimba

    So Minister Gumbo takes issues to cabinet before scrutinizing them? Does he operate without financial and legal advisers? Why was the deal not reviewed by Mpofu as the minister responsible for macro-economic planning or at least have his staffers from the ministry taking part in the adjudication process? How would a deal of such magnitude be approved by treasury when its financial aspects are not well clarified? It cast aspersions on how government operates, with clear deficiencies in coordination and following due process and/or gross incompetence.

  • JoJojWamoyo

    Some are seeing the fall of their haulage trucks Business.

  • shumbasamaita

    What is Gumbo doing if he can’t present a compelling case of a project that is well-documented and which he was briefed on. He should have a helicopter view of the project such that he should get a buy-in from cabinet not to waffle along the way. He should remember there are competing interests by those with their own preferred partners.

  • mafikizolo

    True. Ministers will never allow their main rival NRZ to get back to normal. Remember they own those Yongton buses and 90% of the trucks on our roads. If the NRZ passenger service gets back to normal and if the freight service rises from the doldrums that it is in right now it’s goodbye to those trucks and busses!!!

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