Government has cancelled the US$400 million deal with Diaspora Infrastructure Development Group-Transnet consortium meant to revive the National Railways of Zimbabwe (NRZ) after the group failed to comply with contractual timelines.
Apart from failing to meet agreed timelines, Government re-tendered the deal after DIDG cut ties with South Africa’s publicly-owned rail operator, Transnet, which was part of the consortium agreed in the initial tender award, raising legal complications.
The DIDG-Transnet consortium was awarded the tender by the then State Procurement Board in August 2017 for the revival of the rail operator’s operations.
In a statement yesterday, Secretary for Information, Publicity and Broadcasting Services Mr Nick Mangwana said Government had re-tendered the project.
He said after the consortium was awarded the tender, NRZ was given Cabinet authority to enter into negotiations with the consortium.
“On October 16, 2017, Cabinet granted authority for the NRZ board to negotiate with the consortium and once agreed, to come back and seek Cabinet approval through the Joint Venture Unit,” Mr Mangwana said.
“On February 14, 2018, a Framework Agreement was signed between the parties for the purpose of performing mutual due diligence. An interim solution to plug the NRZ gap while negotiations continued was arrived at. The framework agreement was valid for 12 months.
“It is the Framework Agreement and a separate Interim Solution Agreement that led to the delivery of 13 locomotives, 200 wagons and six passenger coaches on a lease arrangement.”
Mr Mangwana said after due diligence by both parties, negotiations were initiated in October 2018, but could not be concluded within 12 months as per the Framework Agreement.
“In February 2019, both parties made representations to the Ministry of Transport and Infrastructural Development seeking an extension to the Framework Agreement,” hesaid.
“Government granted a conditional extension on 21 March 2019 for a period of six months starting from 14 February 2019. Part of the conditions was that the ‘exclusive clause’ in the Agreement be expunged and that the consortium was to provide proof of funds and shareholder approval before 14 August 2019.”
Mr Mangwana said the consortium submitted an appeal against the above conditions and wanted the extension period to commence on the date of signing and the “exclusive clause” restored.
“Several meetings between DIDG and NRZ leadership took place at which they also raised the concerns that were subject of their appeal,” Mr Mangwana said.
“On June 13, 2019, the Honourable Minister J.B Matiza met the NRZ Board and informed them that the appeal to vary the conditions of the Framework Agreement Extension had been unsuccessful. They were reminded that the six-month extension was due to expire on August 14, 2019.
“Government insisted on getting proof of funds from the consortium before the deadline. NRZ also committed not to enter a competing funding arrangement for the project before August 14, 2019.”
Mr Mangwana said on August 30, a Joint Plenary Session was held at a Harare hotel at which it emerged that there were serious differences between DIDG and Transnet.
“It is important to note that at this point, the parties had still not signed the Framework Agreement Extension they had applied for in February 2019 and therefore, there was no subsisting agreement between the parties,” he said.
“Government indulged the consortium by working with them outside the Framework Agreement. Regardless; they failed to present a common position. DIDG presented a funding structure based on funds sourced internationally, which excluded Transnet.
“The exclusion of Transnet had a legal impact on the tender which had been awarded to them as a consortium. In light of the foregoing, Government took a position to issue a new tender. If any of the former members of the consortium want to compete, they are still eligible to make bids and will be adjudged fairly.”