ZIMBABWE RAILWAYS REHABILITATION ON COURSE AFTER US$115MILLION FUNDS APPROVED

The growing need to restore the National Railways of Zimbabwe to full operational status is now being attended to with the African Export Import Bank prepared to lend US$115 million to initiate the process.

The railways are not dead. They still move 2,3 million tonnes of cargo a year, but this is a little over 16 percent of the 14 million tonnes they moved in the 1990s and just under 13 percent of the 18 million tonnes a year the network is theoretically capable of moving each year. So we have a long way to go.

The cost is high. Of that US$115 million, US$34 million is to restore a critical 254km, about 9 percent of the total 2 760km of track owned by NRZ, that are subject to cautions.

In addition, the communications infrastructure on the network needs to be overhauled. Efficient single-track operations, where trains pass each other with one in a siding, require almost instant signalling so only one train at a time is in the box between two sidings, but without the inefficiency of having the trains in both directions halted while checks are made.

The sort of money required can be most easily apprehended when we look at the other US$81 million of the loan. That will buy nine locomotives and 315 wagons, and fairly obviously a far larger fleet will be required when the railways are back to full operation.

The NRZ will need to ensure that operations are highly efficient, since they need to generate revenue to repay this loans, repay other financing that may be required, and build up their own capital resources.

But that first major injection of finance is needed to gain that initial operational capacity that can generate revenue which in turn will encourage others to move in.

Much of the present system, including its major backbone main lines, was built with borrowed money in the 1890s and the early 1900s using, even by the standards of Cecil Rhodes, was highly creative financing involving multiple issues of debentures backed by each section of track, which in turn produced some financing and ownership oddities.

Rhodes created four companies to build and own the track from the South African border with Botswana through Botswana, Zimbabwe and Zambia and the line down to Beira.

The complex financial arrangements of what amounted to first and second mortgages on each section of track created a list running over several pages.

Eventually everything was consolidated in the late 1920s and the tri-country network in the British territories was nationalised in 1947 and later the Zambian and Botswana sections were split off.

So using a set of interested investors and some rational debt to rehabilitate the system and the fleet is not new, but it does require each step to be carefully worked out to ensure that the extra revenue generated will be adequate to service debt and provide returns for investors.

In many cases the scheduling of the upgrades has to be done so that large sections of the network are upgraded simultaneously to ensure that there is that revenue.

Since a lot of the debt and investor relations will require Government guarantees and Government backing there will need to be very close co-ordination and consultation between the railways and the Finance and Transport Ministries, and the sort of debt we may be talking about will need to be notified to Parliament.

Over the weekend NRZ chairperson Mike Madiro not only discussed the coming Afeximbank loan and why it was needed, but also explained why we had to rehabilitate and then grow the railways, rather than rely on using haulage trucks more and more.

Railways are intrinsically more efficient than road transport and therefore significantly cheaper to operate per tonne per kilometre.

Internally within Zimbabwe there is growing bulk traffic. For example we need to move some types of grain from the north-eastern provinces to the other side of the country; we need to move sugar and ethanol from the Lowveld to the markets; we need to move coal and other resources, remembering that there are now moves to get tobacco farmers to use more coal rather than chop trees down when they cure their leaf.

The upgrade and introduction of mineral processing will often mean we need to move a lot of ore and semi-processed ores to the final processing plant, with often just one or two such plants being needed.

Then come the exports. And here Mr Madiro’s stress on the full use of the whole Southern African network becomes vital both for exports within the region and exports further afield via the ports of the region.

Zimbabwe is poised to renter the export markets for grains, and needs to keep the transport costs low to compete especially considering the premiums we pay our farmers. Markets will probably be regional, but under AfCFTA open markets.

We are already a major coke exporter to regional markets, and this trade is likely to grow with other processed materials added.

The giant steelworks being built at Manhize will need railways to dispatch competitive products around Zimbabwe, into the region and further afield. Our mineral production has quadrupled in the last five years, and while more local processing cuts the volume needed to be moved, the size of the growth suggests more trainloads and more trucks will be needed.

All this means that the NRZ needs to be returned to what it should be, and then grown further.

If AfCFTA is going to work properly, it means African farmers, miners and industrialists will earn more, rather than see their profits slashed by huge transport costs to get their products to markets.

So while trucks work, the greater the bulk, the greater the volume and the longer the distance means that railways assume ever greater advantages.