A crisis meeting meant to resolve bottlenecks stalling the finalisation of the US$400 million NRZ recapitalisation project this week failed to resolve the impasse after legal advisors from the Transport Ministry passed adverse comments.
The deal, involving South African rail company Transnet and the Diaspora Infrastructure Development Group (DIDG) is set to be financed by several banks, mostly from South Africa, to the tune of US$700 million.
Insiders say the crisis meeting held in Harare, chaired by the finance committee chairperson on the parastatal's board, Joseph Mashika, managed to resolve issues around the structure of the deal.
"Basically, DIDG and Transnet came together in a 50-50 arrangement to form Joint Venture (JV1) which partnered NRZ to form JV2, under which the DIDG/Transnet consortium has 60% shareholding and NRZ 40%," an official said.
"Initially the funds were meant to be released to JV1 to ensure the money is under the control of the South African-based consortium because of high country risk but under the new arrangement the funds will be released to JV2. The legal team is questioning this arrangement but the issue was resolved because, in any case, the funds would have still found their way to JV2.
"After the finance meeting, Mashika, the acting chairman of the NRZ board William Dube and NRZ general manager Louis Mukwada held a separate meeting with Transport permanent secretary Amos Marava, but the ministry's legal director Angeline Karonga disapproved the project, insisting the legal due diligence is incomplete."
The Zimbabwe Independent understands that Marava suggested the ministry weigh other options should the legal impasse persist. Transport minister Joel Biggie Matiza on Wednesday said the NRZ should conclude the legal framework for its recapitalisation agreement before February 2019, failure to which the deal would collapse.
As part of the legal due diligence, the ministry's legal advisors are demanding Transnet's board minutes for the past three years and documents of past court proceedings on litigation cases. They also want Transnet's contracts with its suppliers but the DIDG/Transnet consortium believes the demands are unreasonable and will violate agreements which have nothing to do with the NRZ deal.
"There is now belief that some officials are frustrating the deal to elbow out Transnet, but what is certain is that if Transnet is out, then the South African banks will not fund the project and neither will the Export Credit Insurance Company of South Africa (ECIC) insure the funds," an official said.
"ECIC is providing the insurance cover only because Transnet, a South African company, is involved. If Transnet is out then the South African banks and ECIC are out," an official said. Mukwanda could not be reached for comment as he was not answering his mobile phone or responding to text messages.
He, however, told the Independent last week that the delays were caused by "unforeseen bureaucratic issues" and the huge value of the project.
DIDG chairperson Donovan Chimhandaba, however, said the meeting was a success.
"We had a meeting with the finance committee and NRZ stakeholders on Tuesday and we believe we cleared issues to do with the structure of the deal. The only outstanding matter is the legal due diligence but all parties are engaging to find a solution," Chimhandamba said.
"The matters being dealt with are not insurmountable and should not delay or derail the project."
Ministry officials said those thwarting the deal were accusing the NRZ board of being inefficient. The officials are reportedly trying to influence Matiza to dissolve the board and appoint a new one once the working framework expires in February.
"This will enable them to influence appointments to ensure their proxies are on the board, so that they bring their own people onto the table."