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Corruption, politics

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That the National Railways of Zimbabwe (NRZ) is bleeding is no secret.

With reports showing workers at the state-owned rail transport firm have endured five months without receiving their salaries, a privately-owned company in such dire straits would have gone bust.

For months, the NRZ workers’ committee, probably one of the most vocal in the country, has seen its members suffering in silence as the company slides into insolvency.

As the problems continue to mount at NRZ, plans by the government to step aside and court new private investors could eventually hit a snag.

Apparently, the government has no financial leverage to keep the wagons at NRZ rolling, a development that could see interested investors bidding for the parastatal for a song.

NRZ is one of the 10 state-owned entities that were earmarked for commercialisation soon after the formation of the inclusive government in 2009.
In a report presented to Parliament in June this year, Comptroller and Auditor-General Mildred Chiri said NRZ was facing liquidation.

“The National Railways of Zimbabwe is not in a sound financial position as evidenced by a total loss of $34,979 million, a negative working capital position of $22,916 million and a net cash outflow to operating activities of $5,782 million,” she said.

“This means that NRZ is technically insolvent.

“The National Railways attained a gross loss of 22% during the year mainly as a result of the 25% gross loss on freight services.

“This is mainly because of the low business volumes during the year, as the average operating capacity for most industries averaged at about 35%.

“The level of staff costs to revenue of 71% is unsustainable. NRZ currently has about 8 600 employees.”

NRZ’s last published its annual report of 2009 indicated that apart from the working capital constraints that confronted many companies, low volume in business was also another challenge besetting the company. Official figures show that freight tonnage moved by NRZ decreased to 2,6 million tonnes in 2009 from 3,8 million in 2008, when the country experienced an unprecedented economic decline. At its peak, during the 1990s, NRZ transported 18 million tonnes of freight.

Despite relatively cheaper fares being charged by NRZ on passengers, notwithstanding enduring long travel hours, inter-city passenger and intra-city commuter business recorded sharp declines.
The volume of inter-city passengers transported dropped to 1,2 million passengers in 2009 from 4,9 million the previous year.

On the other hand, 800 000 commuters were moved by NRZ in the period under review compared to 4,1 million commuters in 2008, a development that could be attributed to poor efficiency of the State-owned firm.

Official figures also show that currently NRZ has only 13 locomotives functional against an average requirement of 78.

So bad was the state of affairs that NRZ decommissioned a 313km electrified rail between Dabuka and Msasa in Harare in 2009.

The company blamed rampant vandalism, theft of overhead cables and subsequently, a poor working capital position for its failure to maintain its dilapidating infrastructure.

With no immediate plan to resuscitate NRZ in sight, the Zimbabwe National Chamber of Commerce chief economist Kipson Gundani warns that its failure could discourage investment into the country.

“It is estimated that it costs six-times cheaper to transport commodities from Bulawayo to Harare via rail transport compared to road transport,” Gundani said

“Thus, the decay of NRZ will have a significant impact on the transport costs incurred by local companies. More so, NRZ being a key economic enabler, its demise could also discourage investors because they look at the affordability and availability of utilities. NRZ is one such.”

State Enterprises and Parastatals minister Gorden Moyo could not be reached for comment.

Interestingly, while the introduction of the multiple currencies in 2009 came as a reprieve for many at a time when the economy had been relegated to a comatose state, NRZ has not reaped any benefits.

“The introduction of multiple currencies by the government, while impeccably timed, worsened NRZ’s position as it led to total erosion of accumulated local currency savings and threw the entity and the nation at large into a liquidity crunch,” said the company’s general manager, Retired Air Commodore Mike Karakadzai in the 2009 annual report.

“The poor working capital position brought about by the introduction of multiple currencies, led to challenges in maintaining sufficient stocks of fuel and this resulted in intermittent disruptions to the train service.”

NRZ is currently operating below 30% capacity.

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