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CHAPTER 10: Restructuring and Recovery in Railway Services

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CHAPTER 10: Restructuring and Recovery in Railway Services CHAPTER 10: Restructuring and Recovery in Railway Services 10.1 OVERVIEW OF Republic of Congo (DRC) (See Map 10.1). THE SECTOR As a result, the national railway of Zimbabwe has been critical to the growth of the country’s domestic, regional, and international trade as 10.1.1 The Setting it connects all major economic centers and Although continental rail master plans have provides transport for bulk raw materials, existed for more than a century, most of the fi nished goods, and passengers. As in most African railway network remains disconnected, other African countries, the Zimbabwean operating within a single country, or linking railway system served as a primary conduit a port and its immediate regional hinterland. for agricultural and other natural resources The only signifi cant international network is and this largely accounts for the standards and centered in South Africa and stretches north routing that were adopted. to Zimbabwe, Zambia, and the Democratic Map 10.1: Railway Network for the Southern Africa Region Within Zimbabwe, the railway network and its ports of Durban, Richards Bay, and Port connects all major mines and heavy industrial Elizabeth. It is also at the centre of shorter and plants, as well as major collection points for cost-effective railroad links between Malawi farms. The system has three well connected and South Africa through Bulawayo, the port hubs, Bulawayo, Gweru, and Harare (See of Beira through Harare, and Lusaka and the Map 10.2). The railway is at the centre of the port of Durban through Bulawayo. The line international rail routes linking the DRC and from Zambia through Victoria Falls, the line Zambia to Botswana, Mozambique and its from Botswana through Plumtree, the line ports of Beira and Maputo, and South Africa from South Africa through Beitbridge, and Restructuring and Recovery in Railway Services Zimbabwe Report 1 the line to the central parts of Zimbabwe joins the network at Gweru while the line through Gweru meet at Bulawayo, where from Mozambique through Mutare joins the the headquarters of the National Railways of network in Harare. Little expansion has taken Zimbabwe (NRZ) is located. The north-south place since these lines were constructed in main line from South Africa into Zimbabwe mid-twentieth century. Map 10.2. Existing Railway Network in Zimbabwe 2 Zimbabwe Report Restructuring and Recovery in Railway Services In the past decade, the capacity of the railway and Infrastructural Development (Figure network to provide services has been severely 10.1). Institutional reform initiatives in the eroded. The deterioration in track infrastructure, railway sector so far have included internal signaling, and telecommunication system is restructuring of NRZ so as to make it operate due to lack of regular repairs and maintenance more effi ciently, regulating the industry in a resulting from fi nancial constraints on the NRZ. meaningful way so as to protect and enhance Rehabilitation of the network and rebuilding the interests of the customers, and use of the services offered by the rail network are concessions followed by privatization of the therefore major priorities for the country. freight and passenger operations. Most of the emphasis has been on the internal restructuring 10.1.2 Institutional Arrangements of NRZ. There is no separate regulator for and Policy Issues the railway sector and the only recourse for the customers against unfair trade practice or Currently, the only institutions that have a monopoly behavior by NRZ is to appeal to the role to play in the railway sector are NRZ, Competition Commission. the Bulawayo-Beitbridge concessionaire, and the Ministry of Transport, Communications, Through most of the 1990s, organizational, targets for department heads and making operational, fi nancial, and human resource them more accountable for performance; restructuring was undertaken, though to a limited extent, to improve the performance of • Operations restructuring comprised the railways: introduction of a fl exi system for the allocation of drivers, increasing the number • Organizational restructuring comprised of block and customer-dedicated trains, separation of road services department increasing the minimum chargeable load to from the railways leaving NRZ to focus on correspond to the capacity of wagons, setting railways, signing of performance contracts stiff targets for availability, utilization, and between the Government and the general reliability of locomotives and rolling stock, manager of NRZ, and setting performance using cost-benefi t analysis as the basis Restructuring and Recovery in Railway Services Zimbabwe Report 3 for investment decisions, introduction of Member States shall facilitate the provision commodity-based tariffs, and moving away of a seamless, effi cient, predictable, cost- from general tariffs to customer contracts; effective, safe and environmentally friendly railway service which is responsive to • Financial restructuring comprised market needs and provides access to major debt restructuring to maintain NRZ’s centers of population and economic activity. responsibility for servicing debt pertaining to active revenue-generating assets only, The view of the World Bank (2010) is that and stricter expenditure control.; seamless travel is essential for the railways to compete effectively with the trucking sector. • Human resource restructuring focused on Agreements between the respective railways staff reduction so as to lower human resource are designed to provide the member states expenditure from close to 70 percent of with seamless operations (that is, no change in revenues to less than 40 percent. These locomotives) at border crossings. For example, measures helped to bring down the overall Botswana Railways has operated from defi cit, reduce the rate of fresh investment, Plumtree into Bulawayo, Trans Africa trains and enhance management capacity, but the from South Africa to Zambia and Tanzania goal of complete fi nancial self-suffi ciency transit Zimbabwe over NRZ lines, and luxury has yet to be achieved. passenger trains such as Spoornet’s Blue Train However, there is substantial government and Rovos Rail safari trains operate on the involvement in the operational policies of northern line to Victoria Falls. However, if the the NRZ, which is not free to take action railways in the region are to realize the desired without specifi c government approval towards goal of seamless operations as articulated closure of branch lines and stations, setting of in the SADC protocol and as agreed by passenger tariffs, and changing frequency and most countries, further action is required by timings of passenger services or their closure. governments in the Southern Africa region. These are long-standing issues. The World Treatment of public service obligation Bank (2006) identifi ed several critical areas in contracts. For many years, the Government the railway policy domain, namely, absence of has set passenger tariffs at levels that are well a policy regarding third party operations and below operating costs for passenger services. determination of track access charges, absence It is clear from the analysis later in this Chapter of a policy regarding contracts for public that NRZ continues to incur signifi cant losses on service obligations (PSO), and lack of parity passenger services, particularly the commuter between the road and rail services with respect trains. Even though there is provision in the to fi nancing arrangements for maintenance of Railway Act for compensation for services the infrastructure. provided as PSOs, no such contracts have Provision of seamless services. Zimbabwe been signed. PSO contracts are essential is one of the 14 member states that are whether the services are performed by NRZ signatories to the SADC Protocol on Transport or by concessionaires at a later stage. Absence Communications and Meteorology. The of a clear policy and associated contracts protocol recognizes that transport is key in results in reduced accountability and distorted promoting economic growth and development evaluation of the railway’s performance. in the region and calls for increasing private The NRZ needs to be compensated for these sector involvement in railway investment with losses. If the Government were to sign public a view to improving railway work and service service obligation contracts with the railways standards and lowering unit costs. Chapter 7 and agree to compensate NRZ for the losses of the protocol deals specifi cally with railways incurred in operating loss-making passenger and Article 7.1 states that: services, stations, and lines on Government- 4 Zimbabwe Report Restructuring and Recovery in Railway Services determined terms, the fi nancial position of the ore, ferro alloys, granite, raw sugar, maize, NRZ would improve signifi cantly. and wheat. The reduced economic activity Lack of parity between rail and road over the past decade has had a substantial services with respect to funding for impact on the utilization of the freight maintenance costs. The World Bank (2006) services provided by the railways. In 1990, noted that policy was not clearly stated with the total amount of freight carried by rail regard to fi nancing of the rail infrastructure was 14.3 million tons, which translated into at par with that for road infrastructure. Like a capacity utilization rate of about 80 percent. many railways around the world, NRZ has During most of the 1990s, NRZ faced many been making a case for the Government to challenges. As a result
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