A series of blunders by state-owned rail company Spoornet has brought the $5-billion (R30-billion) revamp of Zambia’s railway infrastructure to a standstill. The fiasco, which has resulted in the suspension of senior Spoornet executives and the institution of a forensic audit, has also raised questions about Spoornet’s capacity to assist the continent to revive its railways, many of which have ground to a halt.
It is understood that Spoornet has done no significant work on the project since it began last December. Sources say this has led to the further deterioration of the Zambian rail network, significantly raising the cost of the revamp.
In February last year the Zambian government, anxious to resuscitate crucial economic infrastructure after years of neglect, awarded a $5-billion concession to overhaul its ailing rail network to a consortium of Spoornet and several financial institutions, including Old Mutual, Nedcor and Sanlam. Spoornet was to be the operational spearhead of the project, upgrading tracks, rolling stock and communications.
Among the key elements of the plan was an upgrade of the dilapidated line linking Zambia’s copper belt with the mineral-rich Democratic Republic of Congo.
But mismanagement and lack of capacity at the troubled parastatal have put the project in jeopardy. The Mail & Guardian has learned that the recent suspensions of two top Spoornet executives, Ravi Nair and Harry Mashele, relate to the management of the Zambian concession.
Nair and Mashele were appointed by chief executive Dolly Mokgatle this year to spearhead her five-year turnaround strategy.
Nair, formerly head of general freight business, was made head of the new National Operations Centre, while Mashele, previously manager, international joint ventures, was appointed general manager of corporate strategy, leadership and compliance. Both men are now facing a disciplinary inquiry over alleged mismanagement and reckless conduct relating to the Zambian project.
The M&G also understands that Spoornet recently appointed auditing firm KPMG to conduct a forensic probe into the utility’s handling of the Zambian concession.
The auditing firm has apparently completed its investigation and a report has been submitted to Mokgatle. Its findings are not known, and it is not clear whether the probe relates to risks posed to Spoornet by the contract, or misconduct in its implementation.
Spoornet this week refused to discuss the status of the Zambian concession. On the suspension of Mashele and Nair, Spoornet spokesperson Molatwane Likhethe said: “Their suspension is based on confidential information that has been brought to the attention of Spoornet … At this point it is inappropriate to comment on their suspensions until a thorough investigation has been concluded.”
A Spoornet official sympathetic to both Mashele and Nair said the two executives had been made “scapegoats”. He said a number of Spoornet officials who had been assigned to manage the Zambian concession had not been suspended.
Under the concession the Spoornet consortium was required to upgrade and operate Zambia Railways’ entire network over a 20-year period. The consortium is privately owned, with 80% of the shares belonging to Nedcor, Old Mutual, Sanlam and two United Kingdom investors. Spoornet holds a 20% stake.
In terms of the deal, Spoornet is responsible for the operational side of the concession. But one Spoornet official said the utility’s domestic problems had meant that the Zambian concession had been pushed on to the backburner.
“Spoornet does not have the capacity to fulfil its obligations in the Zambia concession,” the official said.
Asked whether Spoornet was ever likely to meet the requirements of the contract, he said: “No, Spoornet has a big task here at home. It just won’t be able to do the job in Zambia.”
Questioned about whether financial constraints were a factor in the saga, he said: “Yes, but they are not that significant. Institutional investors such as Nedcor, Old Mutual and others have set aside the funds for the concession. The problem is capacity.”
Nedcor director Orville Cachia this week said his company remained committed to the project despite the difficulties. “We will make the concession work. We have had intense discussions with Spoornet and we believe that in spite of the difficulties we will still go ahead. We took over an entire network with a lot of challenges and it is to be expected that there will be some teething problems.”
In South Africa, Spoornet confronts a decaying freight rail system in need of massive overhaul. A R15-billion capital expenditure programme to overhaul locomotives and wagons is in the planning stage, while a 15-year fleet renewal programme aims to improve capacity and service levels.
Exporters and importers have loudly denounced Spoornet’s poor service, caused mainly by the unavailability of locomotives and wagons. Some of South Africa’s largest industrial businesses have ditched the rail utility in favour of road transport and are using the Maputo port in Mozambique, to the detriment of the South African economy.
Spoornet’s turnaround is vital to President Thabo Mbeki’s vision of lowering the cost of doing business in South Africa in a bid to help drive economic growth and job creation. And its Zambian venture is critical to Mbeki’s African renaissance vision.
Spoornet has a presence in a number of African countries through concessions, management contracts and the sale and lease of locomotives — activities that formed part of former public enterprises minister Jeff Radebe’s plan to revitalise Africa’s railway systems in support of the African renaissance.
Economically, the Zambian railways are important for the Southern African region. They connect with the Democratic Republic of Congo, Zimbabwe and Tanzania. Like many other African networks, the Zambian rail system was constructed in the early 1900s and is now in serious disrepair.