Transnet’s $400m Zim railway investment deal cancelled

Zimbabwe has cancelled a US$400m investment deal for the National Railways of Zimbabwe, which had been awarded to a consortium that included South Africa's Transnet and the Diaspora Infrastructure Development Group.

In 2017, the government of Zimbabwe awarded the $400m tender for the revival of NRZ to Transnet and DIDG.

However, on Wednesday, Harare said the tender had since been cancelled.

"Government took a position to issue a new tender.

"If any of the former members want to compete, they are still eligible to make bids and will be judged fairly," Nick Mangwana, permanent secretary for Zimbabwe’s Information Ministry said in a statement.

The decision to re-issue the tender was mainly due to technical differences and disagreements on how it would be funded and concluded. 

According to the government of Zimbabwe, 13 locomotives, 200 wagons and six passenger coaches were delivered by the consortium under a Framework Agreement as well as a separate Interim Solution Agreement pending conclusion of the final investment deal.

Nothing materialised

It has also emerged that due diligence for the investment deal was concluded in October 2018, but nothing had materialised within the timeframe prescribed under the Framework Agreement.

"Government granted a conditional extension on March 21, 2019, for a period of six months.

"Part of the conditions was that the consortium was to provide proof of funds and shareholder approval before August 14, 2019. DIDG presented a funding structure based on funds sourced internationally, which excluded Transnet," explained Mangwana.

Further to this, the government of Zimbabwe had determined that "the exclusion of Transnet had a legal impact on the tender" which had been awarded to the two companies as a consortium. It was not immediately clear when the new tendering process would begin.

In a letter to Fin24 in July this year, Transnet said it was incorrect that it was "intending to invest in NRZ", despite having been part of the consortium that tendered and won a bid to recapitalise the Zimbabwean railways parastatal.

Risks

"Transnet, together with its partners in Zimbabwe, intends creating a separate entity to operate rail freight logistics on a concession basis from the NRZ. The proposed structure will enable NRZ to financially benefit in two ways, through a dividend and as well as a royalty fee which will serve as annuity income," Transnet said in July.

Zimbabwe auditor general Mildred Chiri in July painted a gloomy picture of the state of financial affairs for NRZ, and flagged further risks to its going concern status.

"The financial statements do not present fairly, in all material respects, the financial position of the Railways as at December 31, 2018 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs)," said Chiri in her audit report on the company.

This was because the NRZ was in a net current liability position of US$286.4m as at the end of December 2018, compared to US$256.5m a year earlier. It also incurred a net loss of US$43.7m during the period under review, which "indicate[d] the existence of a material uncertainty that may cast significant doubt over the Railways’ ability to continue" as a going concern.

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