Zimbabwe: NRZ Posts Crippling U.S.$100 Million Loss

THE deeply-indebted National Railways of Zimbabwe (NRZ) made a loss of more than US$100 million between 2009 -- when the country adopted the multi-currency system -- and 2011 raising further doubts over the parastatal's ability to continue operating let alone attain viability.

This was revealed in a report on State Enterprises and Parastatals by Comptroller and Auditor-General Mildred Chiri for the financial year ending December 31 2011.

In the report, Chiri states the NRZ was suffering a negative net working capital position and continued to incur operating loses.

She wrote: "The company's current liabilities exceeded the current assets by US$16 933 762 as at 31 December 2011.

"The company incurred net losses of US$46 027 306 and US$24 403 787 for the years ended 31 December 2011 and 31 December 2010 respectively. At 31 December 2011, the company had accumulated losses of US$105 591 222 since the adoption of the multi-currency system in 2009."

"This, along with other factors, may cast significant doubt over the company's ability to continue as a going concern. Management should explore ways of improving the company's working capital position and reported earnings," the report added.

However, in response to Chiri's concerns over the shocking losses, NRZ management said it anticipated that business levels would "significantly improve in the foreseeable future".

"Despite the continuous losses in the past three financial years the entity has been progressively recording some marginal improvements on capacity utilisation," the NRZ management said in response.

"With the economic environment showing some signs of improvement, management anticipates an increase in the rail friendly business. The entity has been engaging the private sector through private public partnership programmes for the refurbishment of its locomotives and rolling stock while government has been advancing the railways some funds for the rehabilitation of its infrastructure."

The management also said some financial assistance would be secured from international lenders for its recapitalisation programmes, without naming the lenders.

The report accused NRZ of not being up-to-date with its statutory tax obligations, to which management explained that this was as a result of "serious cash flow constraints occasioned by the low business volumes moved since the introduction of the multi-currency regime in 2009".

"However, management has entered into a payment agreement with Zimra (Zimbabwe RevenueAuthority) which was constantly reviewed," management said.

Chiri also raised concerns over the company's failure to meet its obligations after revenue for the financial year ended December 31 2011 fell below the budget by US$81,3 million. The budget from freight revenue, passenger and commuter income for the financial year ended December 31 2011 was US$160 million.

Zisco, once the country's major and successful steel producer and one of NRZ's biggest clients, closed in 2008. Last year government said it had fulfilled its obligations that have been delaying the reopening of Zisco -- now New ZimSteel -- in a deal it entered into with an Indian company, Essar Africa.

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