National Railways of Zimbabwe forensic audit complete

A FORENSIC audit of the struggling National Railways of Zimbabwe (NRZ), the country’s sole railway transport operator, has been completed, the Financial Gazette’s Companies & Markets (C&M) has established.

The company’s board chairman, Larry Mavhima, revealed that the report, which covered the past five years, was handed over to his board last week.

Mavhima, however, declined to reveal details of the report, saying the Minister of Transport and Infrastructural Development, Joram Gumbo, needed to be briefed first before the document becomes public.

He said: “Yes, the independent auditors have completed their investigations. Now we want the NRZ management to respond to the findings and then we will share it with the Minister of Transport and Infrastructural Development. The minister will then share the contents of the audit in Cabinet. That’s when we can share with you the results of the audit.”

The audit focused on three areas namely procurement, real estate and property as well as human resources and staffing.

It sought to determine any leakages in these specific areas as well as how revenue was being collected in the parastatal and to determine whether there were ghost workers on the NRZ payroll.

The company has over 5 000 workers. Over 1 000 NRZ non essential workers are expected to be retrenched to ease the burden on the ailing parastatal.

Several manufacturing companies, which had been the backbone of the NRZ’s business, have closed and shipment of coal from Hwange Colliery Company, which sustained the NRZ, has declined significantly.

The company is also in serious debt, making it impossible to turn the corner without government or external help.

The NRZ is saddled with a legacy debt of more than US$140 million, and requires about US$2 billion in the long-term to be fully transformed.

Options available for the NRZ recapitalisation include joint ventures with non State players.

At present, the NRZ is in discussions with the Development Bank of Southern Africa for a US$650 million rescue package to rehabilitate its ageing infrastructure and equipment that has surpassed the designed lifespan.

Currently, the NRZ, which provides passenger and freight services, is operating below 30 percent of installed capacity due to lack of capital and has been failing to pay salaries.

The NRZ’s goods transport business, which at its peak was raking in about 95 percent of the company’s revenue, has declined to an average of one million tonnes of cargo annually from a peak of 18 million tonnes shipped in 1998.

A number of Chinese investors are keen to partner the parastatal but no deal has been finalised due to an absence of government guarantees.

Out of the NRZ’s 166 locomotives, only 60 are functional, while only 108 passenger coaches, out of 332, are in usable condition.

It has performed poorly in recent years, and has incurred losses of over US$200 million between 2009 and 2013.

Its 2014 accounts showed that its freight unit was generating annual revenue of US$91,2 million, but incurring costs of US$103 million.

The passenger unit had annual revenues of US$3,2 million, with costs over three times more at US$10,9 million.

Its loss widened in 2015 to US$40,88 million from US$31,6 million in the prior year contributing to a cumulative loss of US$276,43 million since 2009 when the country ditched the Zimbabwe dollar due to hyperinflationary pressures.

The NRZ closed 2015 with net current liabilities of US$170,91 million, from US$131,13 million in 2014.

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Source: Financial Gazette

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