Transnet’s target company in Zimbabwe reverts to US dollar rates for freight
HARARE – The National Railways of Zimbabwe (NRZ), in which South Africa’s Transnet and the Diaspora Infrastructure Development Group is pursuing a US$400 million (R5.8bn) investment, has reverted back to dollarisation as Zimbabwe battles a crippling financial crisis exacerbated by wilting foreign currency inflows.
The NRZ offers freight services to various companies in Zimbabwe, chief among them raw materials, heavy industrial equipment, mining production and mineral ore. Zimbabwe officials are also optimistic that Transnet and the DIDG will press ahead with a US$400m investment into NRZ.
The Zimbabwe railways and freight company said in a letter to its freight customers on Wednesday 29 May that in light of economic difficulties and financial turbulence it was reverting back to US Dollar pricing structure.
“In order to continue to sustain reasonable service to industry and other consumers, we shall revert to the US$ rate. The freight rates may be paid either in hard currency or RTGS$ at the prevailing Interbank rate at the time of processing the payment,” Lewis Mukwada, general manager for the NRZ said in a circular to freight customers dated May 29 2019.
The new rates will take effect on June 1, the circular further reads. NRZ has attributed the shift in the currency framework payable for freight services on “the current unstable macro-economic environment which has affected organisations by rising costs of key and critical components such as fuel, spare parts and labour” whose costs have had an adverse impact on operations.
Zimbabwe’s cabinet has also resolved that public contracts for supply and procurement in state parastatals and departments be honoured using the Interbank exchange market of about 1:5 as opposed to the previous rate of 1:1 for bond notes and the US dollar.
Fore NRZ, its freight rates for “over-border traffic which are already denominated in US dollar will remain unchanged”.
Zimbabwe auditor general, Mildred Chiri said in 2018 that the NRZ was in a “net current liability position of $256.5 million” as at the end of 2017.
During the period, NRZ incurred a net loss of $51.9m, translating to an “accumulated loss” of $388m.
“This accumulated loss and net current liability position, along with other matters indicate the existence of material uncertainty that may cast significant doubt over the company’s ability to continue as a going concern,” added Chiri in her report on the NRZ.
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