NRZ $400m deal still on - DIDG

Published: 01 January 2019
THE $400 million National Railways of Zimbabwe (NRZ) recapitalisation deal is still on track with six financiers having shown interest to release close to $1 billion to fund the project.

In 2017, NRZ and the Diaspora Infrastructure Development Group/Transnet consortium penned the $400 million deal aimed at recapitalising and rehabilitating railways infrastructure.

There have been reports that the delays in concluding the deal were as a result of intricate legal processes between NRZ and Transnet of South Africa. Speaking by telephone from his South Africa base, DIDG chairman, Mr Donovan Chimhandamba said despite the sluggish pace they encountered along the way, the deal was on track.

"I think it (matter relating to legal due diligence) has been addressed. We have had two very successful meetings in November and December with NRZ. These paid attention to dealing with the legal matters.

"We are now too far down the line for anyone to want to restart this process and doing so would be foolish," he said.

Standard Bank of South Africa, Amalgamated Banks of South Africa (Absa), Industrial Development Corporation of South Africa, Ecobank Kenya and CBZ are among the six institutions said to have shown interest to fund the mega-project.

Mr Chimhandamba said the recent restructuring and re-organisation of management at Transnet also had an impact on progress.

He said despite the legal nitty-gritties they encountered towards reaching financial closure, the project was much faster than most traditional transactions across Africa. "And the fun thing about this transaction is that the banks are actually ahead of us.

"Unlike in other transactions, you will be persuading the banks. Surprisingly, we have got an interest from banks of close to $1 billion.

"We are oversubscribed in terms of banks' interest to participate in the project and this does not mean that there is a billion dollars.

"But these are people with close to a billion dollars (combined) who are willing to participate in the $400 million NRZ/DIDG Transnet transaction," he said.

When people started talking about the deal's financial closure being something imminent, the DIDG chairman, said this was a misconception

as certain milestones needed to be achieved before the financiers release funds for the project. Mr Chimhandamba said they were largely relying on banks funding rather than the consortium's own money. He said as such there were processes which needed to be followed.

Mr Chimhandamba said owing to the processes involved, financial closure of the transaction would take a bit longer as potential financiers have to do their own due diligence on DIDG/Transnet before they make a commitment to fund the $400 million project.

As an interim solution to addressing the challenges bedevilling NRZ, the railways company is leasing 13 locomotives, 200 wagons and 34 passenger coaches from Transnet. The equipment is meant to boost the NRZ's operational capacity as its freight volume had plummeted due to antiquated machinery. Mr Chimhandamba said the interim arrangement would remain in place until new locomotives were secured under the $400 million recapitalisation project.

"Even if we say the recapitalisation project has reached financial closure today, it will take 24 months to manufacture the locomotives. So, we still need to find an interim solution to NRZ challenges before the new locos under the recapitalisation project are manufactured," he said.

Commenting on the impact of the interim solution, he said: "At the time of the interim arrangement, NRZ was moving 2,7 million tonnes of freight a year and in 2018 there were indications that the railways company might be reporting four million tonnes. And for NRZ to start making money, it has to move at least four million tonnes of cargo."

In the 1990s, the NRZ was moving 18 million tonnes of freight annually.

- chronicle
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