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Friday, 9 August 2013

A Bleak Future for Railways?

Clive Chirwa has written a full defence of his record where he suggests the future of Zambia Railways is very bleak because the company has no money and incurring huge losses :
At present moment Zambia Railways is losing too much money. While I was there we planned to carrying 90,000 tonnes of cargo a month, but in reality the company is carrying far much less and will not meet the target we set ourselves of carrying 1.1 million tonnes in this financial year.

On passenger part the company is losing much more a month and not US$70,000 which is publicised in the media. These losses are unsustainable and the crucifixion of the ZRL vision that I put in place means the only way for the company is to go down the pan rather than growth.

ZRL is currently making money based on the market I developed. There are no new major clients who have come on board. The only mining company that is working with ZRL is KCM whom I brought on board.
Leaving aside the saga of Chirwa's fall from grace, I have always maintained that the economic case for new urban railway investment in Zambia is very weak. To invest in this area Chirwa says he was planning to borrow US$1.5 billion. The problem is that there's insufficient demand for urban rail services to pay back such investment. It is purely a question of size. We are a small country demographically and economically. Tax payers should not be asked to bear such preposterous financial risks.

Zambia should focus on delivering and maintaining roads. In time when demand rises between urban areas we can explore urban rail options. The best thing is to let the private sector fund these initiatives by altering the incentives to encourage modal switch. In the end Chirwa's weakness is that he not only had poor understanding of economics but politics as well. But that is water under the bridge. The challenge now is for the country to agree how best to move forward in this area - or end the journey!

Question: Is Zambia Railways too big to fail? Should it be maintained at all costs? Share in the comments below.

ABOUT THE AUTHOR
Chola Mukanga | Economist | Writer
Copyright © Zambian Economist 2013

2 comments:

  1. ZRL should be saved for sure. Has the government considered privatizing the company, if the cost of running it is so huge-i bet that's the only why the private sector can get involved.

    ReplyDelete
  2. how big is it: employees, historic debt, annual recurring losses, freight carried per annum, passengers carried per annum etc

    in the private sector if a company is bankrupt then it is sold on to someoene else

    in the public sector government keeps allowing the debt to increase at the expense of the taxpayer but will not move it onto another owner

    it is too big to continue, it is not to big to fail, it is a big failure so time to shut it down or move it on to another owner

    but difficult to answer the question without some basic numbers as indicated above

    ReplyDelete

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