The Sunday News
NO country in the world that is serious about industrialisation, job creation and economic prosperity can ever dream of achieving these goals without a solid and functional rail system. It is in light of this that the National Railways of Zimbabwe must be resuscitated if the economy is to move out of the recessionary trend that it has suffered for the past decade-and-a-half or so.
This article will deal with the historical development of railways in Zimbabwe then go on to briefly look at some of the challenges that the parastatal has faced over the years and the reasons why it finds itself in the unenviable position of failing to court major investment for its recapitalisation, being saddled by massive debt and a disgruntled and poorly remunerated staff compliment.
Historical context of National Railways of Zimbabwe
The railways in Zimbabwe were pioneered by the British South Africa Company, which teamed up with other limited liability companies to construct and operate the Beira Railway Company and the Bechuanaland Railway Company Limited. It was later split into two companies and renamed the Rhodesia Railways and the Mashonaland Railway Company. In 1937, the Mashonaland Railway Company was taken over by Rhodesia Railways Limited. The new entity owned and operated most of the railways in Southern Rhodesia (now Zimbabwe), in Northern Rhodesia (now Zambia) and in the Bechuanaland Protectorate (now Botswana) except the 10 kilometre track from Mutare to the Mozambican border, the branch track from Somabhula to Shangani and a small section at the Beitbridge Border Post with South Africa. In 1949, the Southern Rhodesia Government purchased all the shares in Rhodesia Railways Limited transforming it from a private to a public company, and renamed it Rhodesia Railways. During the Federation of Southern Rhodesia and Northern Rhodesia and Nyasaland (now Malawi), from 1953 to 1963, the administration of the railways became the responsibility of the Federal government, with 60 percent owed to the Southern Rhodesian government, 25 percent to the Northern Rhodesian government and nine percent to the Railway Pension Funds. When the Federation split up in 1963, and Northern Rhodesia gained independence and Southern Rhodesian made its Unilateral Declaration of Independence (UDI) in 1965, the two governments agreed to split the railways. The Rhodesia Railways Act was established in 1972 to create Rhodesia Railways. This was further amended in 1979 in anticipation of the independence of Zimbabwe to create the National Railways of Zimbabwe as we know it today.
Operational inefficiencies at NRZ
According to a World Bank report titled “Zimbabwe Infrastructure Assessment: Note for Roads, Railways, and Water Sectors”, the NRZ suffered an eight million-tonne slide in freight traffic between 1990 and 2005. In 1990, NRZ’s freight traffic was about 18 million tonnes but it reduced to about six million tonnes per year during the years 2003, 2004 and 2005 hence precipitating massive losses in revenue. A Report of by the Parliamentary Committee on Transport and Infrastructure Development of March 2012 notes that the decline in freight has continued in the past decade with about 3,8 million tonnes being carried in 2008 and only 2,7 million tonnes in 2009, equivalent to about 15 percent of the original design capacity of 18 million tonnes. From a peak passenger traffic of 17,4 million in 2007, the number of passengers declined to about two million in 2009. The Committee was informed that all NRZ’s wagons had long gone beyond their designed economics life span of 40 years. NRZ owned a fleet of 309 coaches but only 130 were in service and are in a deplorable and unsafe state. The situation has been worsened by the fact that during the UDI period from 1965 up to 1980 world sanctions were in place. As a result the diesel locomotive fleet consists of locomotives from General Motors and General Electric in the USA, Germany, France and the United Kingdom procured through sanctions-busting techniques that limited choice on the type of locomotive procured.
This therefore means that the spares for most of the locomotives cannot be procured anymore as they are either unavailable or the country cannot buy them because of the renewed sanctions against Zimbabwe which were imposed in 2000.
Perennial loss maker
Some argue poor management of the railways over decades has resulted in high inefficiency and poor rail infrastructure and many customers have switched to road trucks as a more efficient and reliable mode of transport. The 2014 Auditor General Report noted that the parastatal’s passenger unit had revenues of $3,2 million against expenditures of $10,9 million. In 2013 the parastatal made losses of $49,1 million, in 2014 it lost $31,6 million and in 2015 it lost $40,88 million. The losses were attributed to low revenue due to capacity constraints, a rigid and inefficient tariff structure, excess staff levels and poor utilisation of assets, which mostly reflected on poor NRZ management and the impact of Government control on business decisions and tariffs. The Parliamentary Portfolio Committee on Transport in 2016 said NRZ needed $653 million for infrastructure and new equipment and it also owed its workers $70 million in salary arrears.
Options for recapitalisation and recovery-Public Private Partnerships (PPPs)
There were a number of initiatives in the 1990s to expand the role of the private sector in provision of infrastructure services in Zimbabwe, but these were largely inconclusive. The most prominent example of PPP-type arrangements was the private concession that began providing rail services in 1998 on 385 km railway between Bulawayo and Beitbridge known as the Bulawayo-Beitbridge Railway (BBR). It was a Build Operate Transfer (BOT) which will see the NRZ owning the railway line in 2029. PPPs have failed to take off in Zimbabwe for a number of reasons.
A good example of PPP that can be utilised in Zimbabwe is the US$2,1 billion deal between South African state logistics company Transnet and global mining group BHP Billiton where the former provides trains to bring coal to the coast for export. South Africa is a major producer and exporter of coal, which gets shipped through its Richard’s Bay Coal Terminal (RBCT) to Asian and European markets. The contract is on a “take or pay” basis, which means that Transnet commits to providing the trains and the company is obliged to pay whether they move product or not. Such a scheme can be employed by NRZ with big companies like Hwange Colliery and other bulk carrier companies like Grain Marketing Board or fuel companies for transportation of the various oils from South Africa and Beira to various destinations within Zimbabwe and that way NRZ will have a guaranteed flow of goods and predetermined tonnage such that these deals can be used as security for obtaining loans and funding from off shore or local financiers through floating of bonds for the recapitalisation of the parastatal.
Restructuring of NRZ
The need for reform of the public enterprise sector in Zimbabwe is an issue of long standing with a track record in terms of progress that has left much to be desired. It was identified as an important policy issue as early as at the launch of the Economic Structural Adjustment Programme (Esap) in 1991 but nothing much has been done about averting the decay at NRZ. One proposes that a new state enterprise be created as the owner of the entire railway infrastructure network (except for the Beitbridge-Bulawayo concession which is still under the BOT arrangement until 2029). The new enterprise can then own, operate, maintain, and rehabilitate the existing railway track, communications and signalling systems, and electrification of the rail network. It would not have any ownership interest in locomotives, rolling stock and coaches, or in related facilities such as maintenance shops and so on. The company can then rely primarily on concession fees to meet its operating costs and to fund a portion of the required capital expenditures on the network.
In parallel with the creation of this new entity, the remaining part of NRZ can then be restructured and transformed into a private company that would provide passenger and freight services throughout the entire rail network as a concessionaire, in competition with other concessions.
With Zim-Asset set to come to an end next year, Zimbabwe has to take bold moves at resuscitating its decrepit rail network so that can contribute to economic revival.
Butler Tambo is a policy analyst who works for the Centre for Public Engagement and can be contacted on [email protected]
