Namibia: New management to make TransNamib railway profitable, says board - African Business Magazine
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Namibia: New management to make TransNamib railway profitable, says board

Namibia: New management to make TransNamib railway profitable, says board

The government of Namibia has decided to operate rail company TransNamib on a commercial basis and is replacing its senior management.

TransNamib board of directors chairperson Paul Smit, said: “Running TransNamib unprofitably and contrary to well-established business principles cannot continue, and has to change. “Thus, the board has made special resolutions to implement its business plan with immediate effect, and appoint a new CEO as soon as possible.” Other new senior executives will also be appointed in the near future.

TransNamib has just received six new locomotives from the Brazilian offshoot of US firm GE at a cost of N$360m ($28.2m), plus 90 tanker waggons for N$132m ($10.34m), as it continues to upgrade its rolling stock. They will be used to transport sulphuric acid between Tsumeb and Walvis Bay for export under a ten-year contract with Dundee Precious Metals.

TransNamib acting CEO Hippy Tjivikua said: “The funding for all locomotives [and] acid tankers was made possible by government, and it should be noted that the integrity of the procurement of this equipment was done above board and transparently, without state capture.” Traditionally, African rail companies have almost all been state owned, state operated and required large subsidies to keep operating, as they are seen as being of great public benefit. This has rarely translated into efficient services and good use of tax revenue.

Although there is now growing pressure to switch to a more commercially-minded operation, this does not usually involve privatisation. Namibia is, therefore, following the South African model of trying to run a parastatal rail company as if it were accountable to shareholders.

Economic context

It will be interesting to see to what extent the same policy is pursued with other Namibian parastatals, such as NamWater and NamPower, particularly as public sector wages account for the biggest share of state expenditure. Although Namibia has been negatively affected by falls in commodity prices, it has managed to keep its economy growing. Annual economic growth fell from 5.3% in 2015 to an estimated 1% last year, while the Bank of Namibia expects 2.9% this year and 3.8% in 2018.

Finance minister Calle Schlettwein revealed her 2017-18 budget on 8 March, with total projected spending of N$57bn. The government has set itself a stiff target of cutting the budget deficit from 6.3% in 2016-17 to 3.6% for the next financial year. The government is introducing a capital gains tax and a new wealth tax but there are few substantive cuts, except to the defence budget.

The government is keen to cut waste as much as it can because of the growing public debt, which is expected to grow from N$71.6bn at present to N$73.7bn by the end of the financial year 2017-18, with debt servicing totalling N$5bn over the year. While the government is right to try to keep a lid on its deficit, the N$73.6bn debt is equivalent to 41.9% of GDP and so is lower than that of most African states.

Speaking to the parliamentary standing committee on economics and public administration, the head of research at Namibia Equity Brokers, Alfred Kamupingene, commented: “It should not be an issue if we generate enough money to honour our financial obligations.”

In the long run, the government is keen to integrate its economy more closely with its neighbours by turning Walvis Bay into an entrepôt for Southern Africa. Together with port operator Namport and other stakeholders, it is in the process of improving road and rail links to the port from the rest of the Southern African Development Community (SADC).

In addition, a new container terminal is being built on 40 hectares of reclaimed land at Walvis Bay, which will take the port’s annual handling capacity up to 700,000 TEU, or standard sized containers. Developer China Harbour and Engineering Company (CHEC) is close to completing the project, which will provide quay length of 2,100m. Shipping cargo in and out of Walvis Bay can save several days transport time for businesses trading with North America and Europe. The port is particularly well placed to serve Botswana.

Neil Ford

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