National Railways of Zimbabwe sinking like Zisco, warns former executive

A former executive at the National Railways of Zimbabwe (NRZ) has warned government to keep its hands off the company lest it collapses like the Zimbabwe Iron and Steel Company (Zisco).

Zisco has not been operating for years and plans to resuscitate the firm have all but collapsed.

In an interview with Standardbusiness, the former executive, who requested anonymity, said NRZ was affected by lack of capitalisation, dwindling industrial base in terms of the business offering and depleted technical and management skill.

“All the investments that were made by [Zimbabwe] Manpower Development Fund have been lost due to non-payment of salaries. Unless there are commitments, there is no prospect of NRZ reviving,” the executive said.

“During my time in service, there was external resistance from investors to come and invest due to our investment policies and too much politicisation in the organisation.”

The former executive said there was political appointment of people in senior positions.

“NRZ is going the same way as Zisco, Zimasco and CSC [Cold Storage Company]. Whenever government gets involved, there is disaster. Government has to understand that business is managed by expertise, not politics,” the former executive said.

“Business at NRZ is being done in politics rather than in business dynamics.”

The warning by the former executive comes at a time when the company has announced plans to lay off 2 000 employees in a bid to stop the bleeding at the railway institution by keeping a sustainable workforce for operational efficiencies.

NRZ board chairman, Larry Mavhima recently revealed the company had since turned to the Reserve Bank of Zimbabwe and Finance ministry to get funding for the retrenchment process, which could cost close to $100 million.

However, analysts who spoke to the Standardbusiness last week said such a move was not workable given that employees were owed in excess of $98 million in unpaid salaries.

“Government certainly does not have the money to pay them or retrench them. Their salaries should have been payable from the railway’s gross profits, but government is responsible for causing the economic damage that reduced demand for rail services,” said economic analyst, John Robertson.

“Lower demand and falling earnings caused the railway’s failures to maintain its services, which resulted in demand falling further. So the deteriorating quality of service caused customers to switch to road transport services,” he said.

Zimbabwe’s economy is currently on its knees. It is characterised by lack of foreign direct investment, tight liquidity, slumping industry capacity utilisation, company closures and retrenchments.

Another economic analyst, Reginald Shoko weighed in, saying the question that needed to be answered was how the government would fund the retrenchment, where the money would be borrowed from and at what cost?

“Firstly, it’s true the company is overstaffed. The questions arise, how they would fund the retrenchment. Will they borrow and from where and at what cost? It’s of paramount importance to retrench as it would reduce the operational expenditure on the company,” Shoko said.

Parliamentary portfolio committee on Transport and Infrastructure chairman Dexter Nduna said NRZ was top heavy and needed to be rationalised.

“It’s top heavy as it has got 300 human resources managers. It’s not commensurate with what is obtaining on the ground,” he said.

Mavhima last week said the government was worried about the number of employees at NRZ, which was not sustainable.

“Government is worried about the number of employees at NRZ when volumes are quite low. We have to rationalise the number of employees. But before doing that, we will need to sit down and discuss the matter with employees. We have to eat what we kill,” Mavhima said.

Transport minister Jorum Gumbo said government had several options to get NRZ back to its feet.

“We are pursuing what we are doing as government and we have our own ways of resuscitating NRZ,” he said.

Analysts say government has failed to turn around the once vibrant parastatal, and suggested privatisation or selling it off to other capable institutions like South African Railways.

“The only available option for turnaround will be to privatise the company and also unbundle it into various entities to attract investors,” Shoko said.

He said government must also ringfence or protect its market as it did before. There were laws that anything above 20 tonnes must be transported by rail, he said, adding such a move would also help improve the lifespan of the country’s roads.

The competition from road transporters, Shoko said, had a massive impact on NRZ and also the economic performance.

Robertson said loan financing would be another option if a lender could be found to offer the billions needed to rebuild the capacity. He, however, added that no lender was likely to come forward if they had to depend on government’s repayment promises.

The equity investors would also be concerned about government involvement and would be more likely to come in if government agreed to let the investors take complete control, he said.

“Unless Zimbabwe quickly changes its policy mix, the country is likely to see that, bit by bit, South Africa and other neighbours will take over the running of Zimbabwe’s affairs and state enterprises,” Robertson said.

Mavhima said they had approached government with the suggestion of privatising NRZ and they were waiting for the response.

“The option is definitely on the cards,” he said.

In his 2017 national budget, Finance minister Patrick Chinamasa said government would continue to scout for a strategic partner for NRZ, despite the fact that a comprehensive capitalisation programme for the parastatal had remained elusive.

He said an allocation of $3 million had been set aside for the rehabilitation of locomotives and wagons, track infrastructure as well as procurement of workshop equipment.

At its peak, NRZ moved 18 million tonnes of freight annually. Last year, the company moved 3 million tonnes of freight and has a target of 3,7 million tonnes in 2017.

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