·         NRZ signs US$81.2 million deal with RITES

·         RITES stock price up 2% following NRZ deal

·         NRZ to receive 315 wagons and 9 locomotives

Rail India Technical and Economic Service (RITES) recorded a 2% jump in its share price on the National Stock Exchange of India Limited (NSE) on the 16th of June, 2023, after signing an US$81.2 million contract agreement with the National Railways of Zimbabwe (NRZ) for the supply of rolling stock. While the contract agreement is subject to approval of funding by the funding agency, the deal is said to be at its late stages.

RITES is a leading player in the transport consultancy and engineering sector in India, with a unique geographic reach and diversification of services in sectors such as railways, highways, urban engineering (metros) & sustainability, airports, ports, ropeways, institutional buildings, inland waterways, and renewable energy. Except for Thailand, Malaysia, and Indonesia, the firm is Indian Railways' sole export arm for rolling stock. RITES has been in operation for 49 years, serving more than 55 countries throughout Asia, Africa, Latin America, South America, and the Middle East. The company became a publicly traded firm in July 2018, and it now ranks among the Top-500 listed Indian corporations by market capitalization.

On the other hand, the NRZ is a state-owned company in Zimbabwe that operates the country's national railway system. The NRZ has succumbed to the country's general economic deterioration over the years. Neglect of maintenance, a lack of spare parts, and overdue equipment replacement have resulted in a scenario where only a portion of the network is in working condition, and equipment failures have resulted in reduced service. Since 2004, steam locomotives have been reinstated since coal is reasonably abundant, whereas diesel must be imported and electrical shortages are prevalent. Furthermore, the corporation is heavily in debt, making it impossible to resolve the situation without external assistance. Transporting goods has decreased from 18 million tonnes in 1998 to 2.3 million tonnes annually, currently. Due to the instability of signaling and control systems, train drivers were reported to be utilising WhatsApp messaging to communicate in 2019. NRZ had roughly 100 locomotives and a 'few hundred' carriages at the time. Due to years of maintenance neglect and theft of overhead line equipment, the 313km electrified section between Harare and Gweru/Dabuka was inoperable by 2009. The line is now served by diesel trains.

NRZ operates approximately 4,225 km of freight railway lines. The NRZ serves a significant transit function in Southern Africa and is well connected with neighbouring countries: to the north, at Victoria Falls, the system connects to the Zambia Railways, crossing the Victoria Falls Bridge. The system connects to the Mozambique Ports and Railways to the east. Maputo is served by a second line heading towards Mozambique. A connecting line to Botswana Railways connects to South Africa, eventually reaching Durban and Cape Town. The Beitbridge Bulawayo Railway opened a direct connection to South Africa from Bulawayo in 1999. The National Railways of Zimbabwe operates no passenger services as of June 2023. NRZ last acquired wagons in 1997.

According to the agreement recently signed by NRZ, RITES will supply 3,000-horsepower diesel electric locomotives and high-sided open wagons to Zimbabwe. Typically, the locomotives can do 90-100km/h with a load of 2,200 tonnes. The deal will see a delivery of 315 wagons and 9 locomotives, which is sufficient in alleviating the transportation burden in the farming and the mining sector. Commercial farmers were consequently forced to use the expensive road transport following the collapse of the rail system in the country, while the mining sector has been succumbing to the huge distribution costs of using road networks.

Lately, the growing mining sector was pooling funds to repair the ailing railway system. A typical example, according to newZWire, is Zimasco, one of the country’s biggest ferrochrome producers, which was planning to spend US$2.46 million to refurbish 100 wagons and six NRZ locomotives. In exchange, these trains would be dedicated to Zimasco traffic, although other customers can use them when Zimasco doesn’t need them.

If successful, the contract between NRZ and RITES will improve the transport infrastructure in the country as roads will be decongested while transport costs will significantly be contained. This will further attract more mining services in the country as transport network improve.

Equity Axis News