Friday, September 07, 2012

'Concessioning of railway line was a raw deal'

'Concessioning of railway line was a raw deal'
By Moses Kuwema in Lusaka and Roy Habaalu in Sesheke
Fri 07 Sep. 2012, 10:29 CAT

THE Railway Systems of Zambia says it is fully committed to discussing and clarifying any issues related to the concession agreement for Zambia Railways for the sake of the nation and the company's employees. And an expert says the concessioning of Zambia Railways Limited to New Limpopo Project Investment was a raw deal for the country.

Responding to a press query following President Michael Sata's directive to justice minister Wynter Kabimba to examine the Freight and Passenger Concession Agreement between the government and Zambia Railways Limited (ZRL), RSZ and New Limpopo Bridge Projects Investment Private Limited, RSZ deputy general manager for corporate affairs Charles Phiri said his company would always respect Zambian laws and the president.

"So far RSZ has received conflicting reports on the actual content of the press conference and is now in the process of studying the information received.

However, suffice to mention that RSZ has been and will always respect the Zambian President and leadership, Zambian laws and the Zambian nation and will therefore be fully committed to discuss and clarify any issues which are related to the Concession Agreement for the sake of the nation and company employees," Phiri said.

He said the authorities in the country have over the years been misled on the concession agreement.

Phiri said there have been attempts by various interested parties and individuals to reverse the government's decision to privatise the Zambia Railways through a Concession Agreement.

"In the course of these attempts, these parties and individuals have misled the authorities in Zambia with unfounded allegations and misrepresentations. Many of these attempts to undermine the Concession Agreement were made by parties who formerly enjoyed unrealistic commercial terms from Zambia Railways for its transportation services. In addition, following the privatisation process and signature of the Concession Agreement, other parties and individuals felt under pressure because they could no longer act freely and treat the Zambia Railways' assets their own, by, for example, stripping the company of its assets for their own gain at ridiculous prices," Phiri said.

Phiri said the situation prior to the Concession and the establishment of RSZ led to the bankruptcy of Zambia Railways and its inability to pay employees' salaries.

He said furthermore, pensions and social benefits for railway employees were non-existent and basic rights were not being fulfilled and as a result, the authorities came to the conclusion that they could no longer run the railway independently and decided that the solution lay in privatising Zambia Railways.

"The bidding process was managed by the World Bank, with the willing participation of ZPA and all other official stakeholders. RSZ won this bidding process and started its activities. RSZ negotiated the Concession Agreement on the basis of putting in place acceptable and normative commercial terms. As a result, RSZ were able to run the railway successfully without the need of government subsidies. Furthermore, the Company's employees and their related salary benefits such as pensions were now secured and respected," he said.

Phiri said RSZ inherited a very old rail network, which had been neglected for many years.

He said RSZ had invested in renewing and upgrading the railway network in a long-term, cost-effective programme of works.

Phiri said the company had approached the relevant authorities on numerous occasions with appeals to support its services but that this was met with limited success.

"The company's competiveness has been further damaged by vandalism to the railway line and equipment and ineffective policing where trouble-spots are identified. Furthermore, the RSZ has been hampered by non-competitive terms when required to pay a Road Levy in its fuel costs, thereby subsidising its competitors," he said.

Phiri said despite the fact that the passenger service should have been handed back to the government under the Concession Agreement, RSZ accepted the government's request to continue operating it.

He said if the government was now seeking a more rapid pace for railway sector infrastructure improvements to meet its own and the country's needs, they would have to cooperate with RSZ in sourcing additional finance to support a faster and expedited cost-effective upgrade plan.

In March 2000, the MMD government decided to concession the freight and passenger services of Zambia Railways to the private sector.

After a process of competitive bidding, the then Zambia Privatisation Agency (ZPA) awarded the concession to Railway Systems of Zambia.

And on February 14, 2003, the MMD government signed a Freight Concession Agreement with RSZ and on August 18, 2003 signed the Passenger Concession Agreement.

RSZ took over operations of Zambia Railways Limited on December 3, 2003. The concession covered the whole inter-mine railway network on the Copperbelt as well as the long haul railway network from the Copperbelt to Livingstone.

On Wednesday, after swearing in Kabimba, President Sata emphasised the need for the government to look into the Concession Agreement with RSZ in order to preserve the national railway infrastructure from further deterioration given that RSZ had failed to invest in the railway assets and improve operations; and to allow government to reposition itself in improving the railway sector which was critical to the country's economic development.

But Phiri could not address the concerns raised by the head of state regarding RSZ's failure to invest in the railway assets and improve operations.

Meanwhile, Ernest Silwamba, a railway engineer, said in the nine years that RSZ had been operating the railway line, it had deteriorated to unbelievable standards.

He said during its time, RSZ had not done any maintenance on the tracks and abandoned the main workshops in Kabwe, the former headquarters of the railway company.

"In the last years before concessioning in 2002, Zambia Railways used to move 1.8 metric tonnes of goods but from the time RSZ took over, this declined to about 700,000 metric tonnes. The train speed has reduced from 65 kilometres per hour to 20 kilometres per hour for both goods and passenger trains because of a deteriorated railway track because there was no maintenance. Traffic volumes have gone down," said Silwamba.

He said the concessioning of the railway line did not add value to the country as RSZ was using machinery left by Zambia Railways.

According to documents obtained by The Post, RSZ had stopped servicing the local industry but was moving goods from the Democratic Republic of Congo.
In the concessioning agreement among its many objectives, RSZ was supposed to inject fresh capital to enhance service delivery and ensure workforce is adequately motivated and well remunerated.

But documents reveal that the workforce had reduced from 1,500 to about 500 employees.

"RSZ is no longer servicing the local industry like the mines, Chilanga (Larfage) Cement, Ndola lime and the government through products like fuel, maize and cattle, instead, they are now moving their own products like sulphur, coal bought from South Africa. Sometimes coal is bought from Wange in Zimbabwe but by agreement they are not supposed to do that. RSZ only paid US$150,000 as entry fee in the first quarter and stopped paying concessioning fees to the government," the document read in part.

Meanwhile, the Southern Africa Railway Association (SARA) said Zambia under RSZ was the worst performing in the region.

The association according to its submission to the government under MMD stated that there was need to repossess the railway line because the country had not benefited economically.

"Tanzania and Mozambique got back their railway lines after they realised that the countries were not benefiting while Zimbabwe refused to concession its line to the private sector. The government under MMD was under pressure from the World Bank to concession Zambia Railways to the private sector which is now a failed project. Under ZRL rehabilitation works had started and by now works would have ended by now. All RSZ did was to get and enjoy the money. After take over, they got all ZRL coaches, wheels and kept them elsewhere and when ZRL demanded for them there was no explanation and for now the coaches are vandalised and reduced to scrap," read another document submitted to the ministry of transport and communication then.

The concessioning was to last for 20 years according to the agreement.

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