US$115m loan for NRZ imminent

Mike Madiro

THE National Railways of Zimbabwe is close to securing a US$115 million loan facility from the African Export-Import Bank (Afreximbank), from which US$81 million would be used to procure rolling stock from RITES Limited of India.

The balance from that financial package would be used by the State-owned rail operator for rehabilitation and expansion of its infrstructure.

Under the RITES deal, NRZ is expected to receive nine locomotives and 315 wagons.

In a recent interview, the newly appointed NRZ board chairperson Mr Mike Madiro said the Afreximbank facility would help his organisation in revamping its operations and ensure it plays its significant role as the country seeks to achieve an upper middle-income economy by 2030.

Mr Madiro said given economic developments in the country, “the railways is behind”.

“So, we need to play a catch-up game as the country is moving towards the attainment of an upper middle-income economy by 2030.

“And given that NRZ is a strategic transporter, this entails that, although haulage trucks are available presently as an alternative, there is no way road can beat railway in terms of economies of scale. As NRZ, we are a vital cog that cannot be wished away in this economy, so the railway operator needs to be capacitated through rehabilitation, recapitalisation and expansion of the network so that it is able to carry its mandate efficiently,” he said.

“And with the RITES of India deal, we are at a stage where financial closure would be reached soon, then once the technical issues to do with the structure of the deal are finalised, then implementation of the project will start in earnest.”

Afreximbank is expected to pay the first instalment to RITES Limited before delivery of the first batch of the rolling stock is made.

“Under the US$115 million Afreximbank loan, a total of US$81 million will be used for procuring nine locomotives and 315 wagons.

“That financial package will also cover the supply of spare parts and skills transfer in terms of training of NRZ engineers to ensure the rolling stock is serviced and given maintenance and all that to promote sustainability,” he said.

“When Afreximbank approves the US$115 million loan facility, US$34 million will be allocated towards infrastructural rehabilitation and expansion of the rail network.”

As part of the engagement and re-engagement drive by the Second Republic, NRZ has also been able to sign memoranda of understanding with Turkish and Russian partners.

Through the agreements, NRZ and its partners have established a framework for strengthening relations to foster economic development. For example, Zimbabwe can leverage on the existing strong economic ties to build a vibrant rail industry and champion trade and investment locally and across the Southern African Development Community.

Zimbabwe’s rail network covers 2 760 kilometres but over the years, the NRZ infrastructure has been worn out. The rail network accounts for a total of 64 cautions (equivalent to potholes in the road network), extending a distance of more than 254km.

Resultantly, the cautions adversely impact on the movement of trains by causing delays or accidents. NRZ, using resources from the US$115 million Afreximbank financial package, would also prioritise rehabilitating its signalling system to enhance the entity’s operational efficiency.

At its peak in the 1990s, the rail operator hauled 14 million tonnes of freight per annum, against an installed capacity of 18 million tonnes.

However, due to the existing challenges, NRZ’s freight volume presently stands at 2,3 million tonnes annually.

It is in this context that the NRZ board and management are rehabilitating, recapitalising operations and expanding the parastatal’s network to boost operational efficiency and capacity, also taking into account the business activity to be generated under the African Continental Free Trade Area (AfCFTA).

The AfCFTA, to which Zimbabwe is a signatory, was operationalised on January 1, 2021, marking historical strides towards continental economic integration.

Zimbabwe has deposited its instrument of ratification, a development expected to pave the way for the country’s full participation in the estimated US$3,4 trillion bloc and the world’s largest single market with about 1,3 billion people.

The AfCFTA seeks to eliminate tariffs on 90 percent of goods traded between member states over 10 years, thus promoting trade and investment across the continent, and NRZ, as a bulk transporter, plays a significant role in facilitating trade and investment.

“We are recapitalising and rehabilitating NRZ, as well as expanding the railway network, solely focused on the regional integration agenda being pursued under the AfCFTA.

“We must have a seamless network into the region so that we service the objectives and vision of the AfCFTA and, thus, our infrastructure as NRZ must be ready to facilitate that economic integration agenda,” said Mr Madiro.

The move being pursued by NRZ also dovetails with China’s Belt and Road Initiative (BRI), which is that Asian country’s ambitious plan to develop new trade routes connecting China with the rest of Asia, Europe and Africa through a network of railways, highways, ports, and other infrastructure projects.

The Chinese government adopted the global infrastructure development strategy in 2013.

“If China is linking the world through the BRI, it means the network that we are developing is also in sync with what China is doing as far as linking the continent is concerned to facilitate trade and investment,” he said.

In light of the recapitalisation and network expansion projects NRZ is set to implement to foster trade across the continent and ensure the parastatal contributes towards Zimbabwe’s attainment of an upper middle-income economy by 2030, the rail operator requires loans at concessionary rates.

It is hoped that through the engagement and re-engagement offensive being pursued by the Second Republic, strategic entities like NRZ stand a chance of unlocking new loans at concessionary rates.

This will give the companies the impetus to implement specific long-term and bankable projects that promote economic development in Zimbabwe, as well as facilitating trade and investment under the AfCFTA.