NRZ deal a potential inflection point in deal making

20 Oct, 2017 - 00:10 0 Views
NRZ deal a potential inflection point in deal making

eBusiness Weekly

Chris Chenga
The National Railways of Zimbabwe (NRZ)’s $400 million deal with a consortium led by the Diaspora Infrastructure Development Group (DIDG) and South Africa’s Transnet, which had hit a brick wall, came back to life after Cabinet approved the transaction.
Now that the deal is back on the table, raising expectation among Zimbabweans, a lot of questions have been raised as to the identity of DIDG. The company remains vulnerable to the tainted narrative of obscurity and shadowy execution that many large deals have unfortunately accrued over time. Deals of the magnitude such as NRZ have found their way into the hands of conglomerates without enough financial, technical, and professional capacity to deliver on such huge capital projects. Eventualities have often led to the uncovering of tender process irregularities, rent-seeking and kickbacks; vices that have also traced to foreign investors and deal brokers.
This NRZ deal, however, is posing to be an inflection point in deal making; a positive inspiration of sorts. DIDG Chairman, Donovan Chimhandamba, believes all processes have been abiding by the book. “We believe the transaction is following due processes that deals of this size require – an open tender process, NRZ briefings, adjudication processes, and clarification processes. The processes have been expansive to include all appropriate stakeholders, and is well on track” Chimhandamba says.
DIDG won the tender beating five other prominent companies, though several other submissions were submitted. Chimhandamba believes that DIDG were deserving. “At a high level, the due diligence to this point was enabled by scrutinising thorough details such as documentation, briefings, and site inspections, all as outlined in the tendering process by NRZ. In terms of our financial capacity, banks have submitted their commitment letters and are included in the tender submission.
“DIDG is, however, the local partner of Transnet in the NRZ deal. We have experience in raising and structuring project finance, and have a detailed proposal included in our tender submission for the NRZ project. What got us to this point in the deal is three key strengths: our financial backing, our strong technical and operations partner (Transnet), and more importantly, the broad participation of Zimbabweans through DIDG.”
There is credible persuasion in his remarks, as there has been progressive transparency through the NRZ deal, with multiple stakeholders as DIDG remaining open to public curiosity. The identity of DIDG itself has steadily been brought to the open. DIDG’s story finds its beginnings in 2015 when the Government of Zimbabwe announced plans to craft diaspora policy.
“DIDG is a company founded and duly incorporated in Zimbabwe and South Africa. It is a Group that is owned and spearheaded by Zimbabweans living in diaspora. It was formed as a response to the Government of Zimbabwe’s Diaspora Policy aimed at attracting Zimbabweans in the Diaspora to invest in Zimbabwe. In 2016, through Zimbabwean owned diasporan social networks such as “Brawlers in Business” and the “Brawlers Golf Society”, a combined membership over 500 diasporans came together to devise a plan that would seek to mobilise and aggregate their efforts towards investing in Zimbabwe” said Chimhandamba.
DIDG conducts its affairs with a nationalist imperative. The group unashamedly conveys a mission statement of making Zimbabwe a provider of world class domestic infrastructure and becoming the regional capital by integrating regional economic infrastructure. Geographically, Zimbabwe can become the focal point of interconnected regional logistics. It seems the group sees the opportunity and is actively working to place itself as the prominent holding entity in the recapitalisation of Zimbabwe’s critical infrastructure.
This potentially places DIDG as a custodian of huge amounts of patient long term capital. In 2010, the World Bank estimated Africa’s infrastructure deficit to be over $93 billion annually. While Governmental representatives in SADC have launched initiatives such as the SADC Public–Private Partnerships (PPPs) Forum and Network, governmental pledges though stretched do not meet this deficit. According to the Brookings Institute, a financing gap of approximately $55 billion a year still remains. There is optimism as other financing for infrastructure from major external sources tripled between 2004 and 2012. These foreign inflows into infrastructure did not abide by other receding investments during the worldwide recession, indicating infrastructure investment as a resilient form of capital flows.
“DIDG’s principle motive is to establish ways that will unlock foreign capital inflows and know-how towards the development of Zimbabwe’s infrastructure. DIDG is an investment holding company that aims to hold equity and control in the assets to be privatised. Our strategic intent is to be the investment vehicle for all diasporans seeking to participate in Zimbabwe’s public sector infrastructure development programmes. DIDG Zimbabwe is setup as a one stop shop and integrator of various local Zimbabwean companies owned by local and Diaspora Zimbabweans that will provide local support services to technical partners in all our deals.”
DIDG is not short of optimism. Data suggests that the sentiment is justified. The diaspora has remained a significant source of financial flows into the region. The Reserve Bank of Zimbabwe estimated remittances in 2017 to reach $750 million, and while most of this figure is targeted for sustenance, more flows are expected if structures of investment and long term returns are created.
“Next we will be rolling out a DIDG listed or over the counter investment scheme to allow more diasporans to participate in the funding of the infrastructure revival programme from all over the world. In the long term we will continue to find, engage and secure those infrastructure projects within transport, power, energy, mineral beneficiation, telecommunications and financial services to expand our investment portfolio and deliver on our vision. We are always looking ahead. We want to complete the NRZ tender process to contract and get the project into execution to deliver the proposed solution and value to the people of Zimbabwe.” Chimhandamba concluded.

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