Following a recent meeting of the National Railways of Zimbabwe (NRZ) board and a joint plenary session by stakeholders on the rail utility's US$400 million recapitalisation deal, the process has moved up to fiscal and monetary authorities for approvals before implementation can commence, the Zimbabwe Independent can report.
Treasury and the Reserve Bank of Zimbabwe (RBZ) are currently assessing the funding package submitted by the Diaspora Infrastructure Development Group (DIDG) which has attracted the interest of various banks, mostly from South Africa, and the joint venture proposal.
The special joint plenary meeting, which was held in Harare on August 30, deliberated on funding proposals presented by DIDG following the nomination of Africa Export-Import Bank (Afreximbank) as the mandated lead arranger of the multi-million dollar deal. Prior to the joint plenary meeting, the NRZ board chaired by Martin Dinha had on September 9 approved the funding deal from DIDG which will see Afreximbank shelling out US$100 million for the project with the primary responsibility of mobilising resources to start implementation.
The NRZ recapitalisation project, being spearheaded by DIDG and the South African rail, port and pipeline company Transnet, which has not yet contributed its funding share and secured approvals, gained momentum after Afreximbank was appointed the mandated lead arranger of the deal, seen as key towards revamping the country's shambolic rail network.
Central bank governor John Mangudya told the Independent that government had set up a special committee to assess the funding proposal tabled by DIDG, backed by the continental bank.
"There is a committee which was set up by government to assess the (NRZ/DIDG) recapitalisation transaction. RBZ is a member of that committee. However, I am
not privy to deliberations of the committee. But what is true is that it (committee) is currently assessing that transaction," Mangudya said.
Finance minister Mthuli Ncube was not available for comment and had not responded to enquiries on the matter at the time of going to print.
Top of the NRZ's August 30 meeting agenda were three major issues, namely Afreximbank and other banks' funding proposals; dealing with issues on the joint venture agreements and the implementation matrix. There are related technical issues which also came up for discussion.
According to documents seen by the Independent, the NRZ board, among other key issues, resolved to expedite incorporation of the "new concession company" which shall be known as Joint Venture (JV2).
"Subject to JV Unit and Ministry of Finance ratification and in line with the JV Act and the cabinet Approval of 16 October 2017, NRZ board hereby approves and recommends proceedings to sign JV agreement with DIDG as the party with funding and approvals so that JV2,the new concession company, is incorporated and can start project implementation. Ministry of Finance to lead the engagement with DIDG and Afreximbank with the support of Reserve Bank and Ministry of Foreign Affairs and International Trade," read the documents.
Some of the resolutions passed by the rail utility's board include the Ministry of Finance leading the engagement with DIDG and Afreximbank with the support of the central bank and the Ministry of Foreign Affairs and International Trade.
The board also agreed that Transnet "is not authorised to engage or enter into a partnership with NRZ and DIDG" since the entity is yet to get funding approval from the government of South Africa.
According to the documents, once the deal is endorsed by the central bank and Treasury, implementation of the project will begin. The documents further show that DIDG wrote correspondence to Ncube and Mangudya, updating the fiscal and monetary authorities respectively on progress made so far in tying up the deal, which had been delayed by a convoluted legal and technical process.
"As the chairman of DIDG, I take this opportunity to provide you with a status update on the US$400 million recapitalisation of NRZ," Donovan Chimhandamba, DIDG chairman, wrote to Ncube on September 4.
"The consortium's proposal was effectively to raise the funding for the project and jointly with NRZ to set up a new rail concession operator (JV2) that would then recapitalise, rehabilitate, maintain, operate and manage the Zimbabwe Railway Network and assets for a period of 25 years."
DIDG also wrote a similar letter to Mangudya on September 5, highlighting that the consortium had secured the required funding to bankroll the multi-million dollar project as well as resolutions of the joint plenary session held on August 30. With Afreximbank now the mandated lead arranger and bank co-ordinator of the project, all banks involved in the deal will be syndicated through the continental bank.
According to the initial financing term sheets, Standard Bank was ready to shell out between US$100 million and US$137 million, Absa (US$200 million), Nedbank (US$200 million) and Nedbank Zimbabwe (US$17,5 million) and the Industrial Development Corporation of South Africa (US$100 million). Ecobank Kenya had also expressed interest to channel US$100 million towards the project, while Trade and Development Bank (TDB), formerly PTA Bank, would provide US$75 million.
Local financial institutions will also contribute. Some of the institutions which have indicated interest in the project are Old Mutual, Imara Asset Management and ZimRe Holdings, among others CBZ Bank was also initially interested in the project.
In terms of the structure of the deal, DIDG and Transnet came together in a 50-50 arrangement to form (JV1) which partnered NRZ to form JV2, under which the DIDG/Transnet consortium has 60% shareholding and NRZ 40%.
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 project, at the centre of President Emmerson Mnangagwa's programme to turn around the country's comatose economy, has already been unfolding with the provision of interim rolling stock.