Economic challenges derail NRZ

HARARE - National Railways of Zimbabwe (NRZ) has revised downwards its target move from 6,8 million metric tonnes of goods this year to 3,8 million tonnes owing to the current economic challenges, general manager Mike Karakadzai said.

Addressing delegates at a consultative workshop, Karakadzai said challenges ranged from depressed performance of the economy, liquidity crunch in the market, power outages and breakdown of aging equipment, the target was now unattainable.

“Out of these challenges the figure was reduced to 4,3 metric tonnes and pointers after our review of performance this year I think we are going to get 3,8 million that is going to be rolled out by this economy. Obviously as a transport logistics company, this is not a pleasant situation because we rely on derived demand and if there are no goods to be transported as an organisation we will be in deep trouble,” said Karakadzai.

He however, noted that the cargo carrier had resolved to introduce sweeteners to encourage companies to enter into public-private partnerships (PPPs), with customers now able to recoup on investment and also enjoy volume-based discounts.

Sakunda Holdings has already undertaken to refurbish a total of 150 wagons for the next three years with about $1 million already spent on  50 wagons this year.

Karakadzai noted that they had also entered into negotiations with customers in service level agreements (SLAs) and they were prepared to undertake certain deliveries although customers were reluctant due to the general economic underperformance in the market.

“We also had an outcry on cash-upfront policy as others requested some credit facility of some sort as opposed to the former. We have now limited the period to two weeks for those who are creditworthy,” said Karakadzai.

He also revealed that uncompetitive rates on the Beira and Harare route which was chasing customers away had now been rationalised with the coming on board of CFM Central of Mozambique.

Southern Africa Railway Association (Sara) executive director Bernard Dzawanda said even though there was a need for a standard through rate in the region it was complicated because of the difference in cost structures among regional rail operators.

“The regional rail operators have different cost structures. For example if you look at South Africa, the railway network is about 22 000km as compared to Zimbabwe’s 3400km. We have guiding principles not to say let’s have a standard rate, it’s not possible. The pricing models are different but we have the Sara marketing policy which gives a guideline as to what should be done on routing and sharing traffic.

The railway operators can agree among themselves without necessarily having a benchmark rate. The rates can only be dynamic and negotiable,” said Dzawanda.

He added that the nature of railway infrastructure called for government to intervene in recapitalising NRZ because “there are those classes of infrastructure  for which it is not profitable for an individual or small group to invest in for a profit,  but there are profitable to the generality of society and railways is one such type of investment.”

“Government needs to intervene and this can take place in two dimensions, from the funding aspect and the policy framework,” said Dzawanda adding that whatever solutions were proffered to get NRZ out of the woods would require government to be the nerve centre.

Lack of adequate capital injections has hampered efforts to revive the company which has failed to pay its 7 000 strong member workforce over the past five months owing to government ineptitude.

NRZ needs $400 million to upgrade its infrastructure in the short to medium term, as it tries to boost its cargo carriage from about 3,8 metric tonnes currently projected to move on the tracks this year although in the long-term it requires t$2 billion to fully revive operations to maximum capacity.

Stakeholder consultation meetings by the rail operator come at a time when government is considering setting up a railway regulatory authority to formulate, monitor and evaluate the industry and restructure the struggling company.

Under the proposed turnaround strategy for the NRZ, the loss-making entity would be unbundled into three companies dealing with infrastructure, freight and passenger services, whose operations and management will be totally divorced from each other.

Competitions and Tarriff Commission chairperson Dumisani Sibanda speaking at the meeting advised stakeholders to cut down on transport costs by resuscitating the use of rail.

“When you are moving goods, there is no value addition but addition of costs. It is an unfortunate scenario that because we are not sensitive to cost management as our costs are getting out of hand.

“Even in circumstances were we have cash constraints we are still adding on so much costs and in the process affecting the quality of life for our consumers,” said Sibanda.

Statistics reveal that the cost of moving goods by rail is much cheaper compared to road.

For example it takes 10 243 litres of diesel to transport 1 000 tonnes of coal from Hwange to Harare using 33 trucks whereas using a train requires slightly more than 4 000 litres. - Kudzai Chawafambira

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