TRANSNAMIB HOLDINGS LTD.
VISION:
TO TRANSPORT NAMIBIA'S SUCCESS
STRATEGY PAPER ON THE TURN AROUND OF
TRANSNAMIB HOLDINGS LIMITED
CHAIRMAN OF THE BOARD OF DIRECTORS: Dr. Klaus Dierks
1.0 GENERAL
This Strategy Paper is based on the findings of the White Paper on
Transport Policy (1994), the Independent Task Force (ITF) Report (1996), the Report of
Deloitte and Touché (2001), the Report of the Presidential Commission of Inquiry (2001)
and my own findings and experiences.
TransNamib Holdings Ltd. (TNL) is on the verge of a breakdown and
collapse. But, the Government of the Republic of Namibia is serious to turn TNL around and
has therefore appointed a new Board of Directors. The new board is most probably the last
chance to give TNL a new perspective. But, the board is fully aware that it can be crushed
between rolling stock and track if not the right actions are taken. The threat to
TNL’s long term economic viability and its resultant prospects for survival is real.
Similarly, the railways in Namibia are at the crossroads. Should it be allowed the railway
to wither away and be replaced by road transport, or should a major thrust occur by
linking the Namibian railway system to Angola and via the Trans-Kalahari Railway Line to
Botswana, Zimbabwe, South Africa and Mozambique and thereby ensuring the long-term
survival of TNL-Rail.
Historically the rail transport system in Namibia has been developed to
accommodate needs far in excess of present day requirements. During the past 20 years,
significant structural changes in the mode of transport surfaced, with both the number of
commodities and passengers showing a dramatic drop and losing their market share to other
modes of traffic. TNL’s rail transport tonnage declined from 3.535 million t-km
(1979/80) to 956 million t-km (2000/01). Consequently the rail system is faced with
maintenance costs of a large spare capacity, which cannot be optimally used. Other
commercialised State Owned Enterprises like, for instance, NamPower, Telecom Namibia,
NamPort are operating in expanding markets under the protection of a monopolistic
environment, allowing them to harvest the fruits of economic development. TNL in contrast
has to continuously adjust to an ever more rapid structural and technological change in
the transport sector and is, as a result of the liberalisation of the market, facing a
severe onslaught by the competition of private road hauliers. In respect of road versus
rail, the scales have tipped in favour of road, a trend that will accelerate if the new
Board of TNL is not able to put the right decisions into place and force the management of
TNL to implement them.
Consequently, survival and turn-around strategies have to focus on a
multi-pronged plan of action:
 | The creation of a highly skilled and efficient business operation, which
is performance- related and stops the erosion of TNL by the "three 10%
concepts": increase revenue by 10% p.a.; reduce costs by 10% p.a. and increase
efficiency by 10% p.a. |
Changing consumer demands and flexibility in manufacturing processes
made large inventories very costly and uneconomical. This led to the concept of "Just
In Time" (JIT) where, under ideal circumstances, goods will move from the production
line to the retailer’s shelves. The ground rule of this concept is that the whole
supply chain must be predictable and to even start with other modes of transport, rail
transport will have to be on time, every time. Predictability can make up for speed in
most cases. The traditional role of rail transport is that of a common carrier or
transporter of last resort. There are, however, certain market niches where rail transport
has a competitive advantage, for example, bulk transportation of commodities such as
fuels, minerals, building materials, grain etc. over longer distances. If rail
transport will have a future, operators will have to be involved into the total supply
chain and provide clients with a total transport solution, but above all, provide a
reliable and predictable service. Longer-term factors such as environmental
considerations might change the transportation market and benefit rail.
The transport sector is very important and comprises approximately 4,5%
of Namibia’s total GDP. In this sector, TNL still plays a dominant role with both
rail and road operations. The main focus of the road operations of TNL is to complement
the rail operations and transport goods (and a limited number of passengers) to and from
the railheads. TNL has a substantial operation in South Africa, transporting goods from
Cape Town, Durban and Gauteng to be transshipped onto trains at Upington.
The Government of Namibia is committed to provide the necessary
infrastructure to expand the economy of Namibia. An additional goal is to strengthen ties
with the neighbouring countries and serve as an gateway to Southern and Central Africa, in
accordance with the SADC Protocol: Protocol on Transport, Communications and Meteorology
in the Southern African Development Community, Maseru, 24th August 1996. TNL
can fulfil an important role in these aspects. It can also provide certain social
services, for example a passenger service on unpopular routes. The Desert Express can help
promote tourism in Namibia. It is, however, essential that TNL will be fully compensated
for such services.
The nature of the core business of TNL is inherently a
capital-intensive operation. This implies that fixed cost is a very significant part of
total cost. High levels of fixed costs mean, that profitability is volume sensitive
(Critical Mass) and this is one of major reasons for the poor financial performance of the
rail core business of TNL.
The total market during 1999/2000 amounted to the conveyance of some
3,9 million t of freight, of which 1,7 million t (43,6%) moved by rail and 2,2 million t
(56,4%) by road. It should be borne in mind that some of the traffic carried by rail is
transshipped to road and vice versa and the tonnage transported by road reflects only
freight carried for reward by professional hauliers including TNL-Road. Of the tonnage
carried by professional road hauliers, some 0,47 million t (12,1% of the total market) was
carried by TNL-Road, raising its share of the total market to 2,17 million t (55,7%).
Professional road hauliers comprising competition to TNL thus secured 1,74 million t
(44,3%) of the market in 1999/2000. The market can also be segmented into imports and
exports, which TNL identifies as traffic carried by rail and road over the border of
Namibia with adjoining countries and local traffic, which includes traffic to and from the
port of Walvis Bay. The tonnage of over border traffic in 1999/2000 is estimated at 1,14
million t (29,3% of the total market), of which 0,46 million t (40,4%) by rail and 0,68
million t (59,6%) by road. Virtually all the traffic regarded as imports and exports move
across the border between the RSA and Namibia via Nakop/Upington. The local traffic
amounted to approximately 2,76 million t in 1999/2000 of which 1,21 million t (43,8%) were
transported by rail, 0,47 million t (17,0%) by road (TNL-Road) and 1,1 million t (39,9%)
by public road hauliers. When considering these tonnages and percentages, it should be
borne in mind that the market share of TNL within the road sector does not necessarily
reflect its competitive performance, as some of the traffic it carries is transshipped
from rail.
Between 1990/91 and 1999/2000, the trend in the net tonnage of traffic
carried by rail was downwards – resulting in an overall decline over the ten-year
period of 12,4% as against an overall growth of about 25% in the real GDP. During that
period, freight carried by Road by TNL increased by 38,9% resulting in an overall decline
of 3,2% in the total tonnage carried by its rail and road services. It is estimated that
the 1999/2000 tonnage of 3,9 million t will grow to some 4,5 million t in 2004/05 and 5,4
million t in 2009/10.
2.0 WEAKNESSES
The economic viability and long-term survival of TNL is under threat. A
number of factors impact negatively on the economic viability of TNL. While the dismal
performance of Air Namibia contributed to the negative financial operation of TNL since
Independence, and with an accelerated speed since 1996/97, TNL’s other business
sections also contributed their share to the negative performance. During the financial
year ending 31st March 1999 the operating loss of TNL-Rail and Road amounted to
N$ 86 million, reflecting the fact that operating expenditure spiralled out of control.
The operating loss was reduced to N$ 23 million during the year 2000 only to be double
back to N$ 46 million during the year ending 2001. Reduced investment income coupled with
ever increasing interest payments on the escalating debt of TNL brought the total loss for
the year 2001 to N$ 59 million.
TNL on incorporation in 1988 was neither given working capital or any
reserves for the replacement of assets. The sale of assets was seen as a vehicle to help
produce these reserves. The result was that as from 1990 the worth of TNL was
systematically eroded. As from 1996/97 the asset base was eroded either and the loss
making speed accelerated. Many analyses indicated that managerial governance is the
root of the situation. It can be clearly stated that the management support systems
and internal controls disintegrated in the past. This is a reflection of the lack of
proper business skills by senior management and the old board’s failure of
supervision. More particular the following weaknesses have been identified:
The rail transport system in Namibia has been developed to accommodate
needs far in excess of present day requirements. Consequently, the rail system is faced
with maintenance costs of a large spare capacity, which cannot be optimally used. The
Capacity Utilisation is at a very low level and will remain low. The utilisation is
reflected by a lowest capacity utilisation of only 3,7% (Windhoek-Gobabis). The highest
utilisation is represented by 16,6% on the Windhoek-Kranzberg-Walvis Bay sector.
In respect of roads versus rail, the scale has tipped in favour of
roads, a trend that in all likelihood will accelerate. As a result of the liberalisation
of the market, TNL-Rail is facing a severe onslaught by the competition of private road
hauliers, especially due the "non-implementation" of the legal "weight
distance charges" for heavy diesel vehicles. The implementation of "cross-border
charges" has had very little impact in respect of "levelling the playing
field" between road and rail. This can only be achieved by the speedy
implementation of the "weight distance charges" (Act No. 18/1999).
The ever-increasing demand for door-to-door delivery of
consignments of the right size, just in time, allows the private road hauling industry
major inroads into the transport market, which previously belonged to TNL-Rail. Structural
changes in the road haulage industry coupled with advances in technology have produced a
rival mode of transport able to cream-off most of the lucrative traffic.
For TNL-Rail, all freight that remains for the future, will largely
consist of the conveyance of bulk consignments of low-valued, high-density freight
together with full container loads. Despite the expected growth in total traffic in
Namibia, over the next few years, TNL-Rail’s tonnage will, most probably, continue to
decline.
The loss of any of the bulk fuel clients would render TNL-Rail
non-viable and seriously impact on the chances for survival for TNL-Rail.
TNL is so far product focussed and not customer focussed.
Various investigations came to the conclusion that:
Prolonged and escalating operating and financial losses at TNL,
especially in the road transportation fleet.
Repetitive investigations and restructuring exercises.
Negative customer perceptions.
Deteriorating company morale.
Cash flow crisis.
TNL is overstaffed, particularly at management levels.
TNL’s wage bill currently amounts to 57% of revenue. Comparable
international norm is 40-45%.
3. Weaknesses of the TNL management are inter alia:
Responsibility, accountability, ethics and culture and discipline is
generally lacking and there exists an ill-defined chain of command.
There are vague areas of responsibility.
There exists an inadequate information system that would facilitate the
measurement of performance.
There is an absence of procedure manuals and job descriptions.
There are inadequate or non-existent reporting procedures.
There is generally a lack of strong leadership.
There is no manpower plan, which would justify the current staff
complement per department/division and would justify and forecast future staff needs.
Although TNL has quite a number of qualified staff members not much is
done to develop them and the current uncertainty resulting in many employees resigning in
search of more stable employment. TNL also lacks specific rail industry knowledge
(technical), especially on management levels.
The reduction in the transport of goods and passengers by rail will
continue independent of the economic growth in Namibia due mainly to the following major
reasons:
A significant drop in the rail transport to South Africa.
Loss of market share to other modes of transport.
Significant falls in the transport of bulk commodities such as coal and
building material from South Africa.
Passenger traffic by rail will decrease further and make this mode of
transport uneconomical.
All these trends will continue if not new innovative strategies are
developed and pursued by the TNL Board of Directors.
Apart from the conveyance of over-border traffic from South Africa on
the line from Upington to Nakop and local traffic on the rail network within Namibia (with
supporting road services), TNL fulfils virtually no other function in the conveyance of
traffic within SADC, nor do the Namibian professional road hauliers. Some freight is moved
by road from and to Walvis Bay on the Trans-Caprivi Highway to Zambia. Some freight is
carried by road on the Trans-Kalahari Highway through Botswana between South Africa and
Namibia, but the quantities are so far insignificant and the routes do not constitute a
market segment as yet which hold much prospect for greater exploitation. The development
of supply chains to southern Angola have to be pursued, now that peace has returned to
this war-torn country. In the long run, TNL-Rail could well fulfil an important function
in the development of supply chains in SADC if its rail network were to be linked to
Angola via the Northern Extension and to Botswana via a future Trans-Kalahari-Railway Line
so as to expand the hinterland of Walvis Bay to incorporate much of southern Africa.
3.0 STRENGTHS
Future growth opportunities for the Namibian Railways are:
TNL-Rail still has significant market shares in the transport sector.
Namibia appears to have a need for a relatively small, but efficient
rail system, at least for the foreseeable future. A total shift from rail to road would
put the already strained road system, which was not designed for these axle loads, under
undue pressure.
The human capital in TNL in respect of intimate knowledge of
transportation and logistics in Namibia is a major asset.
TNL Rail fulfils the fundamental task in the economy of supplying
transport for bulk commodities at rates, which promote basic industrial growth.
New mines are opening (Scorpion) and major manufacturing (Ramatex)
companies coming on stream.
Traffic to and from South Africa (whereby every thing possible should
be done on a political level to keep this line open (SPOORNET of South Africa may be
consider to close the line from Upington to Nakop). TNL Rail would then be reduced to an
internal railway, significantly reducing its chances for survival).
The Walvis Bay Corridor (Future Trans-Kalahari Railway Line).
The new Northern Extension (with extension to Chamutete in Angola).
Prices of TNL are low by comparison to competitors and there is
potential to increase income.
The pillars supporting this growth potential are:
Securing the current income base.
Rationalisation (first cut) – reduce the human resource
complement, stock levels and equipment to required levels under current operating
conditions.
Find a way to run the business that would support the income stream
with resources that it can afford. This would require a re-look at the processes needed to
support the income stream (second cut).
Aligning the organisational culture and supporting structure to the
business focus and process.
Customer driven for profit.
The general condition and state of maintenance of the rail
infrastructure of TNL is sound. Provided the below-recommended actions are implemented,
the present management of track maintenance will be able to cope with the future traffic
demands.
Track related derailments, rail breaks, call-outs and delays due to
temporary speed restrictions are low and the necessary safety inspections are being
carried out. The track is safe for the passage of trains at the authorised speed and axle
loads. The long-term viability of the track structure is sound and over-exploitation of
the track structure and associated structures is not taking place.
It has to be stressed that the engineers responsible for the upkeep and
operation of the rail operations have managed to protect the technical side of the rail
operation from the decay that permeates the rest of TNL. They even have implemented
several innovations.
The "Integrated Railway Approach" (Government is the owner of
the surface track and TNL is responsible for the maintenance thereof) is in principle
suiting the interests of Namibia. This approach is in fact not very "separate between
operation and track" (it has to be noted that eight different separation models exist
in Europe with many advantages and disadvantages). The Namibian model is in practice
leasing back all management and operation of the track, signalling and stations from the
Namibian Government and is responsible for it. This models has the advantage that you
avoid separating transport and infrastructure because if you separate you decrease the
operational efficiency with a high pressure on safety. Safety is the link between the
rail and the train.
4.0 STRATEGY RECOMMENDATIONS
4.1 ORGANISATION, MANAGEMENT AND LOGISTICS
A thorough assessment must be done of the capabilities and competencies
of the Executive and middle management of TNL as well as the immediate reports to middle
management. Those members of management who do not have the capability (as also
demonstrated by performance) must be retired or retrenched. The effectiveness, efficiency
and credibility of Executive Management have to be increased. Fundamental business
management processes and systems have to be installed.
The Executive/middle management must then be given performance
contracts that are specific and detailed and they must then held accountable.
A proper management Executive development programme must be implemented
to equip management with the skills required.
A proper transformation framework must be compiled and approved by the
Board of Directors. Achievable targets must be set and progress monitored on a regular
basis. All managers must be trained in change management.
The Affirmative Action Plan must be enriched through initiatives of
managing diversity. However, implementation must be monitored rigorously by the Board of
Directors.
A thorough assessment has to be made of critical policies and
guidelines required for the efficiency of TNL. Crucial is a critical evaluation of the
current Asset Management.
The internal audit function must not only concentrate on fighting theft
and fraud but has to identify major risks that TNL is exposed to and ensure that basic
controls are in place, verify the effectiveness and efficiency of existing control and
make appropriate recommendations for improvements. This function has to be closely
monitored by the Board of Directors.
There is a need for further retrenchments to reduce costs since
TNL’s personnel costs are too high (more than 50% of TNL’s total income). The
numbers of staff members are also too high for TNL’s sized based on turnover. But
any retrenchments have to be dealt with maximum caution because retrenchments have a major
impact on the psyche of an organisation and thus on the health of employee relations. The
harm caused by retrenchments takes long to undo and organisations have to communicate
profusely to restore trust, morale and motivation of the organisation’s people
because of the aftermath of uncertainty, suspicion and negativity caused by retrenchments.
Therefore retrenchments must be put on hold until a proper strategic planning exercise is
done which would determine the processes and structure of TNL which in turn would show
what numbers of staff with which skills and at what level are required and where. Any such
strategic planning exercise has to be done in close collaboration with the Trade Union.
The exercise should result in a manpower plan.
It is, however, possible to make an immediate cut on management
level (after an individual profile analysis has been made) since there are managers that
are redundant since some of the subsidiaries are dormant. Many older managers and
employees can be retired at an earlier age, after careful analysis.
A salary survey has to be done to determine how TNL’s salaries
compare with their relevant labour market (is in progress).
A survey must also be done to compare board and executive management
remuneration with similar size organisations (Angula Survey). Adjustments must be made
where appropriate subject to TNL’s financial position.
All salary increases must be linked to performance to implement a
performance driven culture. Employees who do not perform must be disciplined and/or
developed. Critical positions must be identified and high flyers must be identified and
the compensation tailored (e.g. premium allowance).
Human Resources (HR) must receive proper qualifications and
development in Strategic HR Management and Development. This function must continue to be
on a strategic level (executive management). However, the structure of the department must
be re-looked to provide maximum leverage for strategic input based on the turnaround
structure of TNL. The current structure seems inadequate. The HR department must be held
accountable for implementation. Output must be monitored rigorously. It has to develop a
"leader" vs. "followers" attitude by overcoming the
"administrator" attitude.
The overtime policy must be updated and streamlined to reflect new
realities. Overtime should not exceed the hours prescribed by the Labour Act and should
generally be minimised. It has to be questioned whether Senior Management should be
entitled to any overtime. But if it is decided that Senior Management is entitled to
overtime only a limited overtime budget which may not be overspent has to be considered.
A formal communication mechanism must be put in place between
management of TNL and the Trade Union in order to keep the Union informed about
organisational processes and activities. Consultations must take place with the Union
before processes/interventions are implemented that have an impact on the TNL staff.
TNL is currently in a severe cash flow crisis and needs a
re-capitalisation or major cash injections by Government. The great goal is to
reach cash flow independence in between three to five year’s time (i.e. independence
from subsidies from the State Budget). This can be achieved by exploitation of all
development possibilities, by the turn-around and upgrading of the managerial skills and
by levelling the playing field between rail and private road transport by legal means.
This will in all likelihood only happen in terms of the normal running of TNL. With regard
to upgradings and the replacement of expensive assets (e.g. new locomotives) TNL will
continue, at last for the short term, to rely on State financing.
TNL-Rail must become not only a profit-orientated enterprise but also a
client-driven company. Much of the traffic transported by TNL originates from a few
clients (16 major clients altogether, mainly in the fuel, building materials and minerals
sectors) – their retention is essential and they need to be managed very carefully,
even on the level of the CEO. The bulk and break-bulk traffic of some 150 other
customers contributes another 9% towards total revenue, while several hundred customers
using container, TNX, OPX and parcel services account for about 25% of the revenue. As the
total bulk and break-bulk traffic of TNL presently comprises at least 87% of its total
traffic by mass, it is evident that the capacity, which TNL must provide, is largely
determined by the few customers yielding 60% of the revenue. Returns on the outlay needed
to pursue the numerous small customers diminish rapidly. This raises the question of the
extent to which TNL should compete in the market segment for small consignments
particularly OPX, parcels and some TNX traffic.
The traditional problem of transhipment off the train and onto cartage
vehicles makes it difficult to compete with private hauliers, at least as long as the
legal requirements to level the playing field (weight-distance charges) are not
implemented. TNL will have to remain competitive by becoming conversant with or be able to
offer and maintain logistical support services. It has to retain a "Critical
Mass". TNL has to develop and manage multi-modal supply chains from South Africa,
which will require specialised knowledge of freight-handling methods and transport as well
as costs, including vehicle operating costs, handling costs, time costs and inventory
costs.
As an alternative, TNL could well promote the conveyance of general
traffic (i.e. not bulk) from origins within South Africa to Upington by road and offer
efficient transhipment and movement by rail into Namibia. The gradual disuse of the De Aar
to Upington railway line for general traffic may also induce the fruit growers in the
vicinity of Upington to export through Walvis Bay by rail. This, however, has again to be
pro-actively and aggressively marketed by TNL. However, success is likely to be achieved
only if TNL can secure control over the entire supply chain, which will require the
function of a specific organisation versed in supply chain economics.
Rail passenger services are provided on the routes between Windhoek and
Upington, Windhoek and Walvis Bay, Windhoek and Gobabis, Windhoek and Tsumeb and from
Tsumeb to Walvis Bay. It is understood that the latter two routes do not yield profits
according to the current method accounting the services. If the outlay on the Starline
rail equipment is regarded as sunk and the freight trains hauling the passenger coaches
are actually scheduled to meet the requirements of freight customers, the exploitation of
the market for rail passengers seems to be worthwhile in the future. However, it is likely
that the demand for freight movement by TNL’s main rail customers could be met more
closely by unscheduled services tailored to their specific demands. If so, the savings
should be weighed against the current net annual income from rail passengers, which is
only about N$ 2,0 million. There are no doubt also political constraints on the withdrawal
of rail passenger services, but if so, TNL may be able to obtain compensation in terms of
its Performance Agreement with the State, should the relinquishment of the passenger
services be shown to improve its financial position.
The market of passenger bus services depends largely on the routes
exploited, schedules and service frequencies, as well as the equipment used, and the
validity of the projection by TNL can be assessed only through a detailed investigation of
the viability of the road passenger services division and its prospects. There exists
evidence that on more than 50 bus routes few are profitable. Whether an increase in
patronage will improve the viability of services depends whether that will occur within
the existing schedules or whether new services to create new market segments will be
instituted, as fares seem to be less than the unit costs per passenger-kilometre. It does
therefore seem that TNL’s participation in this market segment contributes to its
financial predicament, although, again, it may be politically difficult to withdraw.
Again, TNL may be able to obtain compensation in terms of its Performance Agreement with
the State, should the relinquishment of the bus passenger services be shown to improve its
financial position and because none of the bus passenger services supplied by TNL can be
regarded as core business.
The passenger market can, however, be considerably improved if TNL
pro-actively market train services, especially steam rail services for millions of
international wealthy steam locomotive enthusiasts world-wide, for international tourists.
TNL’s shares of the Desert Express (partly hauled by steam traction) should become a
very profitable part of the operations of TNL-Rail.
4.2 RAILWAYS (TECHNICAL)
An agreement has to be reached with Government about the funding of
rail infrastructure maintenance (unambiguous Service and Maintenance Agreement).
The National Transportation Services Act of 1998 stipulates that the
Railways is transferred to the State, and TNL shall be solely responsible for
the costs incidental to the maintenance of the railway, including any re-investment
required to maintain any line of the railway. This provision in regard to the costs of
maintenance should be re-considered. As a result of the very thin market for rail
transportation in Namibia, the problem of very low utilisation of the track will remain.
The rail transport market in Namibia is simply not big enough for TNL to make full use of
the total capacity of the rail network. TNL would therefore, be obliged to pay for
maintenance of spare capacity while private transport operators are only partly paying
for the usage of the road through the fuel levy (the weight distance charge according
to the legislation is still not implemented and should urgently be implemented). This
places TNL in a very uncompetitive situation. It is therefore recommended that
Government should compensate the operator TNL for the total amount of track maintenance
and then charge him for the usage of the track. This charge would preferably be based
on a percentage income.
In addition, the National Transportation Services Act of 1998,
describes the funding on upgrading projects as follows:
Funds for upgrading to improve the design standard of the railways on
commercial grounds to reduce maintenance cost or to comply with the transport market
demand and environment will be provided by TNL Holdings where TNL initiates the
improvement.
If the Shareholding Minister requests an upgrading of the design
standards the Minister will fund such part of the upgrading which cannot be reasonably
recovered by TNL from users of the transport services.
If railway related improvements are required by TNL to be erected on
the railway, TNL shall finance, design, construct and maintain for its own account such
structures and assets, unless otherwise agreed. Prior to the construction and installation
of such assets, the Minister shall be informed thereof in writing.
An Agreement should be reached between the State and TNL including
terms and conditions providing for the basis on which an upgrading to improve the design
standard of an existing railway line will be effected and funded by the State and TNL
(National Transportation Services Act of 1998).
The generally accepted railway standard (G.A.R.S.) allows axle loads of
18,5 tons and a speed of 100 km/h while on sections of the Namibian railway system only
maximum axle loads of 12,5 tons and a maximum speed of 65 km/h are allowed. To achieve the
above G.A.R.S. standard, the following design standards are required:
Rail: 40 kg/m or higher
Sleepers: 40 kg concrete or steel at 700 mm spacing
Ballast: 1200 m3/km
Curves: R > 600 m
Gradients < 1 : 66.
The upgrading exercise should concentrate on the most important TNL
line, i.e. the Walvis Bay, Windhoek and Keetmanshoop line. This line has to a large extend
been upgraded already and only needs an additional 76 km of railway to be upgraded at an
estimated of N$ 85 million to be spread over several years. The upgrading to G.A.R.S.
standards of the Kranzberg/Tsumeb/Grootfontein line at an estimated cost of N$ 550 million
is difficult to justify economically and depends on the traffic volume on the future
Northern Extension. The upgrading of the rail infrastructure to allow for axle loads of
18,5 tons and speeds of 100 km/h, however, also require an "analysis and
strengthening report" of all steel bridges, as well as of the reinforced concrete
bridges and culverts. This analysis is required to determine the present load bearing
capacity of the structures, taking into account the original design parameters and fatigue
which may have weakened the structures since construction.
New railway extensions currently under construction resp. possibly
envisaged for the future are the following:
The Northern Extension: The Northern Extension Railway Line from
Tsumeb to Oshikango is in the stage of construction at considerable cost to the
Government. This line will be economically viable and will be of great economic and social
importance for the country. The income that will be generated by this line is based on the
assumption that TNL will be able to capture 95% of the base commodity market.
Traditionally, this is a market that is suited for rail transport and it can be expected
that TNL will be able to achieve a great deal of this. The northern continuation of the
Northern Extension would facilitate eventual connection to the Angolan railway system near
Chamutete. Walvis Bay is one of the most efficient ports in Africa, maybe in the world,
and this link allows traffic flow from and to Angola. If the situation in Angola
stabilises, now peace has come, it would only make economic sense for Angola to upgrade
the railway link to and the facilities at the port of Namibe (although this can take many
years to come) and exports its minerals through its own port. TNL should proactively
influence mining companies to build the railway line between the mines near Chamutete and
Oshikango (resp. Ondangwa).
The Trans-Kalahari Railway Line: The Trans-Kalahari Railway Line
linking Gobabis through Botswana to Gauteng and Zimbabwe would shorten the current railway
line via Upington drastically and put TNL in a better competitive position, especially if
shipping lines would change their rates to Walvis Bay from being the same as to Durban.
However, Botswana would only be interested in such a line of the considerable coalfields
in the east of Botswana can be developed.
Rail Fleet of Locomotives: The fleet of railway vehicles is in
an acceptable condition. The present maintenance practices ensure high levels of
availability and reliability and conform to the requirements for railway operations. To
meet the maintenance demand of TNL, the present management practices should depend more on
condition monitoring processes and statistical forecasting methods. The general approach
is that of Preventative Maintenance. The preventative maintenance system is mostly
time-based and if regular updating of the work content is neglected one runs the risk of
either over or under maintaining the fleet. The current and future prospects for the
locomotive fleet can be summarised as follows:
The present locomotive fleet consists of:
200 series: 2 active, 2 staged and 2 just sold;
400 series: 31 active, 3 wrecks and 2 staged;
500 series: 8 active (500 series are refurbished 400 series
locomotives).
Total active fleet: 41 locomotives.
A total of modern diesel-electric engines/turbines have been bought
from General Electric Transportation Systems (GETS) of which 7 have still not been
installed due to the unavailability of funds. It is strongly recommended that the funds
required (approximately: N$ 500.000 per unit) be made available for the refurbishment of a
further 7 locomotives. Refurbished locomotives would be suitable for another 10 years
service. Furthermore it is recommended that due consideration be given to the disposal to
the best advantage of the last 4 200 series locomotives and replace the 2 in active
service by refurbishing of 2 of the wrecked/stages 400 series locomotives.
The monthly technical availability of the 41 locomotives varies between
85% and 90%, which is considered to be good, taking into account their age and partly
outdated technology. Utilisation is in the order of 50% that is below world standards,
however, considering the train plan and schedules cannot easily be improved upon. The
reliability of an approximate average of 25 incidents per million kilometres is very good
when benchmarked against world standards, especially considering the age of these
locomotives. This indicates the possibility of that the locomotives are somewhat
"over maintained". The average distance run per locomotive for the month of May
2001 is as follows:
Series 200 = 2.893 km (January 2001 it was less than 1.000 km)
Series 400 = 7.143 km
Series 500 = 8.300 km
The kilometres run per locomotive are lower than the norm of 10.000 km
per month average. The kilometres run by the 200 series is unacceptably low.
Locomotives to be replaced in the future should be replaced with new
most current technology locomotives. The major advantage for such
new technology locomotives is that such locomotives can be tailor-made for the
requirements of TNL. Such locomotives should be much more cost efficient as far as fuel
consumption and maintenance is concerned.
The specification for such a new technology locomotive should be
based on the following standards in the following table:
| TABLE 1: SPECIFICATION: LOCOMOTIVES
FOR THE NAMIBIAN RAILWAYS
Type:
Diesel Electrical Locomotive
Track Gauge:
1 067 mm
Wheel Arrangement: 4 axle Bo-Bo or 6 axle Co-Co
Maximum Axle Load : 17 ton/axle
Maximum Speed:
140 km/hour
Engine:
Turbo
charged diesel engine with
possibly sequential turbocharging to
effect
high efficiency under all operating
conditions
Electrical System:
Adequately rated to perform
reliably
under
all operating conditions: Thyristor
controlled
AC traction motors: One hour
rating
for all equipment at full power and a
speed
of 32 km/hour
Running Gear:
Self
steering (flange less steering)
bogies:Starting
adhesion value of 40%
i.e.
minimum starting tractive effort 251
kN:
Usable adhesion of 34% up to a
speed
of 32 km/hour: Full electronic
wheelship
control
Body:
Single
cab- layout
Brakes:
Capable
of operating trains with vacuum
or
air brakes (direct and gradual release)
systems
General:
Electronical control systems to enable
high
efficiency operations under widely
varying
conditions: In particular self
diagnostic
functions for trouble shooting:
Modular
design for all systems to effect
ease
of maintenance: High reliability
required
(less than 10 failures per one
million
kilometres with availability of
95%):
Maximum limp home capability
Ambient Conditions: - 5o
C to 45o C: Height above sea level:
maximum
1500 m: Severe sandstorms
from
time to time: severe grass seed
clogging
for cooling and breathing
systems
from time to time.
On the basis of this specification the Locomotive DE 1500 N ("N"
stands for Namibia, I would propose to call the locomotive the "Afrosprinter")
has been designed by Siemens-Krauss Maffei in Munich based on the Austrian ÖBB
Locomotive Rh 2016 which will be built and assembled in Germany (Siemens-Krauss
Maffei high technology, South Africa (body and steel works) and assembled in Namibia
(preferably in Usakos)(initially: Namibia content: 12 - 15%)).
The specifications for the Austrian ÖBB Locomotive Rh 2016 are the
following:
Wheel Arrangement: Bo'Bo'
Mass:
80 t
Length:
19 275 mm
Power:
2000 kW
Starting Tractive Effort: 235 kN
Maximum Speed:
140 km/h
The strength optimised locomotive frame provides high passive safety with 1 MJ energy
absorption in hydraulic combination buffers and high-performance deformation elements.
The trucks have wheel disc brakes and a pinion hollow shaft drive. The tractive effort
is transmitted by truck pins.
A brushless three-phase synchronous generator flange-mounted on the diesel engine feeds
a DC link via a rectifier bridge, from which the PWM inverter to power the three -phase
asynchronous traction motors, the train supply bus converter to power the train supply
bus, and the auxiliaries step-down chopper are all powered. The power electronics is
implemented with water-cooled GTO technology.
The control and monitoring functions of the locomotive are performed by a central SIBAS
32 locomotive control unit with SIBAS Klip stations.
The ÖBB Locomotive Rh 2016 has to be modified to meet the specifications for
the Namibian DE 1500 N by reducing the power to 1500 kW and the mass to 68 t (17 t per
axle).
   
Austrian Locomotive Rh 2016: Prototype for Namibian DE
1500 N: Body and Frameworks: Siemens-Krauss Maffei in Munich in Germany: June 2002
Copyright of Photos: Dr. Klaus Dierks
   
Austrian Locomotive Rh 2016: Prototype for Namibian DE
1500 N: Different Stages of Construction: Siemens-Krauss Maffei in Munich in Germany: June
2002
Copyright of Photos: Dr. Klaus Dierks
Austrian Locomotive Rh 2016: Prototype for Namibian DE
1500 N: Final Assembly: Siemens-Krauss Maffei in Munich in Germany: June 2002
Copyright of Photo: Dr. Klaus Dierks
Austrian Locomotive Rh 2016: Prototype for Namibian DE
1500 N: Cockpit: Siemens-Krauss Maffei in Munich in Germany: June 2002
Copyright of Photo: Dr. Klaus Dierks
 
Austrian Locomotive Rh 2016: Prototype for Namibian DE
1500 N: Boogey: Siemens-Krauss Maffei in Munich in Germany: June 2002
Copyright of Photos: Dr. Klaus Dierks
 
Austrian Locomotive Rh 2016: Prototype for Namibian DE
1500 N: Locomotive ready for Delivery: Siemens-Krauss Maffei in Munich in Germany: June
2002
Copyright of Photos: Dr. Klaus Dierks |
| It should be striven to revive an old
project to manufacture such modern-technology locomotives in Namibia (Basic
specifications: Table 1) under the umbrella of a tri-partite joint venture viz.
TNL-Namibia, Union Wagons and Carriages in Nigel near Johannesburg, RSA and Siemens
Germany (Krauss-Maffei in Allach near Munich). This development project unfortunately
never materialised due to the uncommitted attitude of the German Government and the German
counterpart, namely Siemens-Krauss-Maffei in Munich and the "Bayrische
Industrie und Handelskammer: Export-Klub" in Munich/Germany in 2002. In-spite of
years of work on the Namibian side (Ministry of Works, Transport and Communication,
Ministry of Trade and Industry and TransNamib Holdings Ltd.) the German partners didn't
seem to understand that such a joint venture between Germany, South Africa and Namibia
would represent a real "South-North-Dialogue" which would not only build
capacities in Namibia, make good business for German technology (Siemens-Krauss-Maffei),
but would produce modern technology locomotives for TransNamib, but for the whole
Sub-Saharan Continent , because Africa is crying for locomotives. After all our efforts with the German side have failed, we
started negotiations in 2003 with the People's Republic of China which revealed
immediately concrete results:
A new Prototype Locomotive, based on above
specifications was designed and the first four locomotives are under manufacturing and
will be shipped to Namibia in beginning of August and will arrive at the beginning of
September 2004 in Walvis Bay. The next step will be to start an Assembly Plant for these
locomotives in Namibia (possibly Usakos) not only for the replacement of old TransNamib
locomotives but to supply the African Continent with such locomotives.
Model of the new TransNamib Diesel-Electric Locomotive (1 850
kW) manufactured by the China South Locomotives and Rolling Stock Industry which in Future
will be assembled in Namibia (Usakos)
Copyright of Photo: TransNamib Holdings Limited
    
Official Handing-Over of the four Prototypes of Diesel-Electric
Locomotives (1 850 kW) by the China South Locomotives and Rolling Stock Industry which in
Future will be assembled in Namibia (Usakos) to the Chairman of TransNamib Holding: Dr.
Klaus Dierks: Walvis Bay: 04.09.2004
Copyright of Photos: Dr. Klaus Dierks
SPEECH BY THE
CHAIRMAN OF THE BOARD OF DIRECTORS OF TRANS NAMIB HOLDINGS LIMITED, DR. KLAUS DIERKS,
AT THE OCCASION OF THE HANDING-OVER OF THE FOUR PROTOTYPE DIESEL-ELECTRIC
LOCOMOTIVES AT WALVIS BAY ON 04.09.2004
The official handing-over of new
rolling stock to TransNamib Holdings limited shows the historic significance of this
important event in the history of Namibia and the Company. The delivery of four high
technology Diesel-Electric Locomotives and 30 fuel tank wagons is the evidence that
TransNamib is "transporting Namibia's success". This is the first new rolling
stock which was ever purchased by Transnamibia since its inception in 1988 (the old Board
of Directors and the old Management of TransNamib before the year 2002 only sold assets
and rolling stock in order to balance their books).
Two and a half years ago TransNamib was
practically bankrupt. The new Board of Directors under my leadership and the able new
Management under the leadership of the Chief Executive Officer, John Shaetenhodi, has
achieved in the short time of a little more of two years "to turn TransNamib
around" by the implementation of a very strict "Turn-Around Strategy" to
make the Company profitable by the year 2004 by:
| Reduce Company Costs by 10 % per
annum;
|
| Increase Efficiency by 10 % per
annum;
|
| Increase Revenue by 10 % per annum.
|
We have been able to achieve this
ambitious goal. The nearly bankrupt company of two years ago is now highly profitable.
With pride we can also say that we have not dismissed a single employee and have started a
huge investment programme. The
new Board of Directors was able to address seriously and efficiently the past destabilised
and demoralised state of the staff of TNL and to give a clear, rational and strong
leadership to TNL. We have now a highly motivated work force which is the core to
contribute to the success of TransNamib.
The new rolling stock is not only proof
for TransNamib as "Namibian Success Story" but it is even more important
that it builds a bridge between the People's Republic of China and Namibia (and for that
matter between Namibia, the People's Republic of China and the United Kingdom because the
Diesel Engines V 16 are manufactured by Cummins in the UK) and create a real
South-South (South-South-North) Co-operation Project.
These four locomotives which are the
most modern technology locomotives in the southern African region are the Prototypes
for a new development: More locomotives have to follow because TransNamib is constantly
expanding. But the idea is that finally these Chinese-British High Technology
Locomotives have to be manufactured in Namibia in the future.
These locomotives are not only needed
for TransNamib but Namibia has to to be established as a Locomotive-Producing centre
for Sub-Saharan Africa, because Africa is crying for locomotives. I am dreaming and I
am working that !Usakos as the junction between the North-South railway line to Angola and
in the future to Zambia and the railway lines to South Africa via Keetmanshoop and the
future "Trans-Kalahari Railway Line" to Botswana, Zimbabwe and directly
to South Africa should be the place of such an assembly plant, with the support of the
People's Republic of China. |
Namibia's TransNamib (manufactured in Namibia) Luxury Train, the
"Desert Express" at Walvis Bay: 04.09.2004: Ultimate Railway Experience through
Africa's Gem, Namiba
Copyright of Photo: Dr. Klaus Dierks
Namibia's Luxury Train, the "Desert Express" at the
Station Stingbank in the Namib Desert near Ebony: 30 km west of !Usakos: 04.09.2004:
Ultimate Railway Experience through Africa's Gem, Namiba
Copyright of Photo: Dr. Klaus Dierks |
The locomotive staff comprises two Technical Superintendents which
report to the Section Engineer: Motive Power and they have four first line supervisors and
one tutor at the Windhoek depot, as well as one first line supervisor at each of the
sub-depots at Keetmanshoop, Windhoek and Walvis Bay, reporting to them. Generally, the
staff is competent with relatively low levels of experience. There are also a few
individuals that are critical to the successful operation of the locomotive maintenance
organisation. Succession planning for these people is imperative to ensure the survival of
the organisation over the log-term. Communication between technical staff and locomotive
drivers is hampered by the fact that drivers no longer bring locomotives into the
locomotive depot at the end of a trip. The shedmen are tasked with this function. This
practice is not optimal, as experiences on the rail are not fully communicated to the
technical staff for diagnostic purposes. Some supervisory staff has established that they
experience difficulties in getting artisans to complete their reports. It seems that in
some instances correctly applied disciplinary action in the past was overruled by top
management, with the result that the authority of the supervisory staff is undermined.
Such circumstances are undesirable and should be rectified.
Carriage and Wagon Fleet: The present carriage and wagon fleet
consist of:
Revenue coaches 106
Non-revenue coaches 32
Revenue good wagons 1 542
Non-revenue good wagons 228
Total number of passenger vehicles 138
Total number of goods vehicles 1 770
The current and future prospects for the carriage and wagon fleet can
be summarised as follows:
Of the revenue coaches approximately 40 are staged of which some will
be put up for sale soon and the others will be kept for possible future expansions of the
passenger services. The condition of the coaches in active service is reasonable and there
is no reason why they should not last for another 20 years. The number of non-revenue
coaches (mostly cabooses) is considered excessive for such a small railway. The necessity
for each of them should be analysed in order to reduce the number of them. The revenue
goods wagons are all fitted with roller bearing axle boxes and some of them are fitted
with HS boogies. Except for some of the tank wagons the fleet is not very old and should
be good for more than 20 years, provided the present maintenance system is kept in place.
Traffic failures of coaches and/or wagons are very rare. The monthly availability of
various coaches and wagon types varies between 95% and 100% except for a few instances
where a specific coach or wagon is out of service for a major repair program or as a
result of an accident. This is in line with a well-run maintenance approach.
The coaches are being serviced and repaired in the open air and in the
old steam vehicle shed. The workshop space is very limited for the work undertaken. There
are no specific workshop facilities provided for coaches in Windhoek, as coach repairs and
heavy maintenance only became necessary after Independence. The wagon repair shop is neat
and tidy, but the situation can be greatly improved by making surplus space in the
locomotive depot available for coach maintenance.
TNL has already Board approval to upgrade wagons with high stability
boogies but the project has been delayed because of the shortage of funds. Technically the
proposal is sound and certainly the correct long-term direction. It will also be necessary
to upgrade the track over which the higher speeds are envisaged, however only if really
necessary after measurement of track shifting forces when running with high stability
boogies. The Section Engineer: Carriage and Wagon has two technical superintendents
reporting to him in Windhoek. One of them controls the workshop activities in Windhoek and
the other the yard activities in Windhoek, as well as at the sub-depots at Keetmanshoop,
Otjiwarongo and Walvis Bay.
4.3 ROAD TRANSPORT
Road Transport Fleet: The road transport fleet consists of 114
tractive units and 5 dual-purpose (freight and passenger) rigids. Following there are
recommendations to put a plan of action into place:
Many of the road vehicles are past their economical life and are in
need of urgent replacement.
A concerted management effort is required to develop a rational and
economic plan for vehicle replacement.
Full maintenance lease contracts should be explored.
If the road transportation age were to be reduced to 5 years and the
trailer fleet to 8 years, at an approximate capital cost of N$ 75 million, then it should
be possible to achieve a maximum cost saving of N$ 13 million per annum.
The following main cost centres have been identified as incurring
excessive costs:-
The Cost of Labour amounts to N$ 9,6 million and represents 54,5% of
total maintenance costs (excluding external maintenance costs). Labour costs, particularly
in respect of an old fleet, should not exceed 36% of the total costs.
The Total Cost of Maintenance per km at approximately N$ 2,20 is
exorbitant, despite marking allowance for the high cost of maintenance on the Rosh Pinah
contract. It is estimated that for a fleet with an average age of 5 years, the cost of
maintenance (given the relatively low utilisation of the vehicles) should not exceed N$
0,90 per km.
From a different perspective, the total cost of maintenance represents
more than 39% of total revenue, which is unacceptably high.
The Fuel Costs appear equally exorbitant (these figures could be
inaccurate as it has not been possible to obtain reliable fuel figures between road and
rail operations). Current fuel usage is estimated at 76 l/100 km and is well in excess of
the 60l/100 km one would expect, taking into account both the fuel intensive Rosh Pinah
operation, and the fuel efficient South African across border operations.
The Cost of Tyres is currently running at N$ 0,42/km, whereas the
normal expectation would be N$ 0,28/km or even less.
The Driver Costs and Vehicle Utilisation are equally unsatisfactory.
The average vehicle utilisation at around 80.000 km per vehicle is low, probably as a
result of low vehicle availability due to old age. Driver costs are correspondingly high.
2. Cost savings could be achieved as follows (N$ 43 million in total):
The annual cost for vehicle maintenance is budgeted at N$ 22,5 million.
Potential savings amount to N$ 13 million per annum.
Potential fuel savings N$ 4,6 million per annum.
Potential savings on tyres N$ 1,4 million per annum.
Potential savings in driver costs and vehicle utilisation N$ 1,0
million per annum.
Although it is contended that TNL-Road is profitable, that is difficult
to support and the full costing of its operations with proper provision for depreciation
and repairs over the lifetime of the vehicles should prove otherwise. In any event, the
prospect of TNL-Road competing successfully with privately owned road haulage concerns
specialising in niche markets or with the many predatory concerns, is remote, especially
as the economics of scale of road transport are limited. It is doubtful thus whether TNL
could rely on its road transport services to raise its market share in the long run i.e. a
large road transport concern carrying general cargo could not survive in the existing
market. TNL Road should thus be regarded mainly as an extension of the railway system.
4.4 PROPERTIES
Fixed Properties: The property division is responsible for the
management of all the company’s properties not utilised by specific business units.
Its portfolio covers various office blocks, as well as industrial, business and
residential properties, which are being leased to the private sector and state, owned
enterprises. It would appear that the property section has been badly managed,
incompetently handled without the necessary skills and knowledge to make out of this prime
property portfolio, a proper revenue producing entity. Losses of millions of Namibia
Dollars have been made due to poor management and possibly fraudulent practices. A
major income producing potential exists for the properties in Windhoek and Walvis Bay, and
the proper development of some of the prime properties in the portfolio should allow for
the increase of revenue from this source. Instead, this property portfolio has been
utilised to generate cash through the sale of properties – often at ridiculous low
prices – instead of the building of a revenue producing entity. The income potential
of the properties in Windhoek and Walvis Bay should be unlocked as a matter of urgency.
Competence in the handling of a property portfolio must be obtained and is the sine qua
non for the successful implementation thereof.
A deeds of search of all properties registered in the name of TNL
Holdings Ltd. was recently performed, but due to the inadequate descriptions in the Fixed
Assets Register (FAR) these title deeds could not be agreed to the FAR. It is doubtful
that this has been corrected in the mean time. The Companies Act requires a company to
keep a FAR with sufficient detail and a list of properties should be disclosed in the
financial statements. Besides contravening the Companies Act, management of TNL can also
not ensure that adequate safeguarding of assets of TNL can at present not be sufficiently
identified.
It seems that the account personnel CANNOT or is UNABLE to:
Properly identify the assets disposed/scrapped and therefore cannot
determine their original costs and current net book values.
Match the proceeds on disposal received for procurement to individual
assets.
Calculate the profit/loss on disposal of assets.
Remove the disposed/scrapped asset from the FAR, as no proper asset
register is kept.
Properly record the transactions in the general ledger of TNL.
The situation regarding Fixed Properties can be summarised as follows:
TNL does not have a formalised, approved policy regarding the
alienation of properties. The personnel acted upon the internal TNL-document
"Standard Practice Instructions D.0002" dated 28 August 1991, whereby the Board
of Directors (and in some instance the CEO) has the sole authority to alienate or sell any
immovable property of TNL. (It has to be mentioned that Government never sanctioned this
"Instruction"). The absence of an up-to date policy is in the past reflected
in the inconsistent manner in which properties were sold. Furthermore, the lack of a
proper policy encourages malpractices.
A proper valuation system for properties to sale is lacking. There is
evidence that properties were sold based on valuations made in 1988. In various other
instances there is evidence that properties were sold at well below their municipal
evaluation. The concept of establishing reserve prices for properties is not consistently
applied as this only happened in isolated cases. Furthermore, no evidence could be found
on most of the property files as to the methods used in arriving at these reserve prices.
The risk of financial loss to TNL, as a result of disposing of properties below market
values, is immense.
The tendering system regarding the alienation of properties is
questionable as no formal Tender Board or committee dealt with properties sold by way of
tenders. In most cases, no evidence existed, indicating the presence of Tender Board
members when opening tenders. It is not even clear, whether the Internal Audit Department
participated in this. All this evidence raises questions about the fairness and
transparency of the tender adjudication process.
There are also unclear indications that tenders were submitted before
due dates, as no records are kept to record such tenders, and the fact that various
tenders submitted did not bear any date. Access to the tender boxes is also questionable
as evidence exists that at some instances more than one tender was submitted by the same
bidder, with only the price of such tender that differed. The tender box is also located
within the property division with no indication that access to it is limited to a specific
person. Such a tender system exposes TNL to possible financial loss and legal action as
the transparency thereof is in doubt.
Movable Assets: The current procedures, "Standard Practice
Instructions No.F2003", used in the alienation of movable assets are outdated as
these procedures were written some twelve years ago and are not in line with current
accepted business practice. Furthermore, these procedures seem to be inadequate, as they
are very vague in terms of the methods to be followed in the alienation of these movable
assets as well as the identification of movable assets to be alienated. Further problem
areas are the following:
The tender procedures in selling the movable assets seem to be
questionable. As in the case of Fixed Assets there are no standardised and formalised
tender procedures to be followed when movable assets are alienated. There is also evidence
that in some instances it is difficult to verify many of these tender transactions, as
record keeping thereof is poor. The numbering system of tenders is also inconsistent as
only a few tenders are numbered. The recording process for the receipts of tenders and the
subsequent adjudication process are not documented. The access to tender boxes is not
restricted with the real possibility (in some cases reported) of tampering to tenders.
There also seems to be confusion regarding the levying of GST/VAT on
the sale of movable assets. It was also reported that in some cases motor vehicles were
sold on tender without removing from the TNL’s records, causing it unnecessary
financial losses though the levying of license- and de-registration fees.
6. All-in-all there seems to be a total lack of commitment and
discipline as well as managerial order in the handling of Fixed and Movable assets with
the result of huge losses, wastage and even fraudulent alienation of TNL assets.
10. January 2003
Dr. Klaus Dierks
Chairman: Board of Directors: TransNamib Holding Ltd.
ABBREVIATED VERSION: TRANSNAMIB HOLDINGS LTD.
STRATEGY PAPER ON THE TURN AROUND OF TNL
CHAIRMAN OF THE BOARD
OF DIRECTORS: Dr. Klaus Dierks
1. New Board is decisive to turn around
TransNamib Holdings Ltd. in order to (under the scenario that capitalisation by Government
was missing from outset: establishment of the National Transport Corporation in 1987):
- To stop bleeding: Air Namibia nearly
bleeded TNLH to death;
- Two ways to turn TNLH around:
- To reduce costs: Basis of new Railway is a
debt-free structure: Top Priority;
- To increase income by creating a harmonised and
integrated transport system;
- To establish real assets and real liabilities;
- Analyse what have you got and what can be
done with it.
2. Reduce Costs by:
- Cost cutting by efficient management;
- Reducing the cost of rail freight to the national economy;
- Right-sizing: No retrenchments but changes;
- Establishment real capital requirements for next five years:
What do we need and what do we want to get rid off: Balance
Sheet: balance assets and liabilities.
3. Increase Income by:
- Analysing the market: what is the
potential: Integrated transport
market chains;
- Core business of TNLH is railways (bulk freight) with road
transport services as complementary and extension services;
- To be: Customer driven and not product driven (for instance:
open door policy by Chairman and CEO, one account only for
every customer);
- Winning back lost markets;
- To exploit potentials like container markets in co-operation
with NamPort;
- By development of new markets as windows of opportunities:
- Locomotive manufacturing/assembly in
Namibia
(Windhoek/Usakos), but analyse the markets;
- Development of Walvis Bay Corridor including
the Trans-Kalahari-Railway Line;
- Development of Northern Railway Extension into
Angola;
- Development of Southern Transport Corridor:
Take concession from SpoorNet for De
Aar-Nakop railway line;
- Tourism Industry (Desert Express and steam
traction tourist luxury trains.
4. Be careful changing existing regulations
(National Transport Services Company Holdings Act No.28 of 1998): Exploit existing
legislation for Public Service Obligations (PSOs)(Loss-making passenger services as
national, social and political obligations have to be re-imbursed by the Shareholder).
5. Split between core business and non core
business like assets to be put into a separate company.
6. Performance Agreement between Shareholder
and Chairman of board of directors (Shareholder compact).
Consequently the following points in
turning-around TransNamib Holdings Limited have to be observed:
1. Rightsizing of the Organisation:
The size of the organisation is driven by
its market and for TransNamib Holdings Ltd. this no different;
During the last 12 years, the million ton
kilometres have reduced from 3.535 to 956 million ton kilometres. This in itself should
have a significant impact on the size of the organisation;
Core business should be clearly
distinguished from non-core business and separately ringfenced to manage and measure
differently;
Excess capacity should be identified and
ringfenced. The management of excess capacity is different and this should be realised.
2. The Market
For every type of business within
TransNamib Holdings Ltd. an effort should be made to establish the market, i.e. General
Freight, Bulk Freight, National Passengers, Tourism Passengers, Containers, Overnight
Delivery, Asset Management, etc.;
In evaluating the market, the following
should also be taken into account:
Present Market;
Future Market;
Development to increase markets:
Development of new railway lines, e.g. the Northern Extension railway line to Angola, the
Southern railway line to Lüderitz, the Trans-Kalahari and Trans-Caprivi railway lines;
Close relationships with NamPort and the ports of Walvis Bay and Lüderitz, as their
markets have a direct impact on the markets of TransNamib Holdings Ltd.;
Present clients: The use of client relationship managers should ensure that TransNamib
Holdings Ltd. are closer to establish the future needs of all the TNLH's clients and
future clients as well as the returning of past lost clients;
The process of freight logistics is in certain circumstances should be made more
appropriate.
3. Ringfencing of core and no-core
business
It is essential that the core business be
separately managed from the non-core business. The ringfencing of all types of business
are therefore essential. The costing of services delivered with each ringfenced business
unit is essential;
Once ringfenced and properly measured,
certain business could be subject to subsidisation by the Namibian Government, i.e. loss
making activities like certain passenger services, in accordance with Act No. 28 of 1998.
4. Management Systems
The true potential of management can only
be exploited once they have accurate, adequate and timely information available. The
existing TNLH information systems did not keep up with all the developments within the
organisation and do not deliver appropriate management information;
Clients should be managed as one customer
and not customers from every separate division within TransNamib Holdings LTD;
All processes within the group should be
supported by proper systems. Performance management is also essential as well as the
development of managers. This should be done via performance contracts;
Levels of authority framework should be in
place.
5. Balance Sheet
Capital structure and replacement of
assets;
The nature of business within TransNamib
Holdings Ltd. is very capital intensive with the result that the decision to change the
operations of such an organisation are normally of a longer-term nature. Very important is
to determine the capital structure. The majority of organisations like TransNamib Holdings
Ltd. are under-capitalised. This has the effect that capital investments are not taking
place as well as the post-ponement of the replacement of assets;
Major recapitalisation is required and the
most appropriate way is through the recapitalisation of the company;
All assets and liabilities should be
properly accounted for, i.e.
Fixed asset register should be in place
and reconciled with title deeds and general ledger;
All assets not in use should be separately
accounted for and disposed of;
Properties should be split between core
and non-core properties. Non-core properties should be ringfenced and separately managed;
Accounting policies relating to assets and
liabilities should be clear to ensure that all assets and liabilities are properly
accounted for.
6. Regulations
The use of regulations to give advantage
to rail transport (levelling the playing field between road and rail) should be treated
with care as existing legislation and regulations should not be used to solve inherent
problems within an company. Firstly the existing legislation should be fully exploited
before considering such a step. The enforcement of existing laws, especially the use of
weigh bridges is very effective and should be used efficiently. The building of an weigh
bridge at Gobabis (Trans-Kalahari-Highway) is urgent and the time frame for the building
of such a weighbridge should be pushed forward.
7. Other
Careful consideration should be given to
methods in reducing the size of TransNamib Holdings Ltd. without a significant impact on
the employment of people.
Examples of which are:
Management buyout with a term contract;
Transferring certain investments to other
government departments, e.g. the Swakopmund Hotel;
Merging certain operations with other
government departments or state owned enterprises, e.g. overnight service with similar
services in NamPost, etc.;
Non-core properties could also be
addressed in a similar manner.
Dr. Klaus Dierks
Chairman: Board of Directors: TransNamib Holding Ltd. (30.06.2002)
SUMMARY:
TURN-AROUND STRATEGY (14.11.2002)
INTRODUCTION:
We have not a Capacity Problem but we have
to optimise our capacity. We have to identify rail-friendly business (block loads, siding
to siding etc.) and we have to minimise rail-unfriendly business.
PROBLEMS:
| Lack of Service
|
| Lack of Vision
|
| Lack of Strategy
|
| Lack of Focus
|
MAJOR PROBLEM: LACK OF
IMPLEMENTATION
SOLUTION:
| BENCHMARK THE TRANSPORT INDUSTRY
|
| GENERAL FREIGHT IS OUR CORE
BUSINESS
|
| ANALYZE:
|
OPERATIONAL CENTERS
CUSTOMERS: MARKET SECTOR ANALYSIS:
IDENTIFY TRANSPORT CHAINS LIKE
MINING DEVELOPMENTS (SCORPION, GAMSBERG etc.)
OTHER CUSTOMERS
CREATE GAP ANALYSIS: ANALYZE
RELATION BETWEEN OPERATIONAL TNL REQUIREMENTS AND CUSTOMER REQUIREMENTS: HOW TO MINIMISE
AND SUSTAIN
IF YOU MEASURE SOMETHING ITS
GETTING DONE
MEASURE PROJECTS: EVERY PROJECT
TO BE TUNED AROUND
BREAK OPERATIONS INTO MILESTONES
TO FORCE MILESTONE DEVELOPMENT:
PERFORMANCE SYSTEMS
| TURN AROUND MASTERPLAN
(INCLUDING COST OF IMPLEMENTING AND NON-IMPLEMENTATION)
|
| OPERATIONS AND MARKETING
(COMMERCIAL) HAVE TO BE MARRIED
|
| OVER BORDER TRANSPORT: 95% IS
RAIL-FRIENDLY AND PREDICTABLE; BUT: PROBLEM: NOT BALANCED: LONG TERM SUSTAINABLE SOLUTION
HAS TO BE FOUND
|
MAIN PRIORITY FOR 2003: RAILWAY
OWNERSHIP
The National Transportation Services Holding
Company Act of 1998 (No. 28 dated 31.03.1999) stipulates that the Railways is
transferred to the State. This ownership question is of great concern to TransNamib
because it reflects negatively on the business prospects of the company. When the National
Transportation Services Holding Company Act of 1998 was drafted by the Ministry
of Works, Transport and Communication in 1996 the then Deputy Minister for Works,
Transport and Communication (Dr. Klaus Dierks, M.P.) levelled serious concerns on the
wisdom of pursuing the railway ownership to the State. For historic reasons and to give
the background the document on the comments on the: "REPORT OF THE INDEPENDENT TASK FORCE TO REVIEW TRANSNAMIB LIMITED" is quoted:
TNL0
20.07.1996
The Honourable Minister of Works, Transport and
Communication
Oskar Valentin Plichta, M.P.
MEMORANDUM BY DEPUTY MINISTER TO MINISTER:
SOME INITIAL COMMENTS ON THE
REPORT OF THE INDEPENDENT TASK FORCE TO REVIEW TRANSNAMIB LIMITED
1. General
This is a report (the Report) that has been commissioned by
Cabinet, and which has been paid for with considerable public funds. To prepare inputs
into the work, a number of consulting teams have been made use of, including a team
fielded by the World Bank and a consultancy team from the German DE Consult, financed by a
German government grant outside the donor assistance country frame and initiated by
myself. Against this background, the Report must be viewed as an exceptional document. I
am then not thinking of the neglect in the Report of some basic rules that must always be
followed when issuing official documents, including proper editing, and the use of correct
and balanced language. Rather, what is so exceptional about this Report is that it is
almost completely void of any serious presentation of the state-of-the-art, in-depth
analysis and careful review of this situation which is supported by empirical evidence,
and proposals for change that are supported by a convincing analysis based on available
evidence to ensure that they are sustainable and will lead to a more efficient use of
resources in Namibia.
There are areas of major concerns that should be pointed out in
the Report, which could have major implications for the future of Namibian transport in
particular and the economic future of Namibia in general. But before doing so, there is a
need to highlight one aspect that is the basis of the criticism that his been levelled
above. This concerns the actual presentation of TransNamib (TNL) made in the Report.
It has to be recalled that the work of ITF was to be concerned
with TNL and its future. Against this background, it is to be expected that the ITF would
have presented a full description of what TNL is actually doing, i.e. its business
activities, especially an in-depth analysis of their performance. I would like to recall
that I have personally issued some performance analysis to the ITF which should have been
considered. Another area that one would have expected to be covered in the Report is a
comprehensive review of the present legislation providing the basis for TNL, i.e. the
National Transport Corporation Act of 1987. In both these regards, the Report is
inadequate.
Firstly, the analysis of the TNL’s business activities is
very incomplete. The Report essentially only covers three areas - the three most visible
areas - road, rail and air. The analysis presented regarding the financial performance of
this activities is not very penetrating, as stated above, and also fails to highlight a
special dimension underlying the peculiarities of the finances of TNL (of considerable
importance not just to the present situation but also to any future situation), viz. the
special taxation regime which applies to TNL. In fact, the taxation regime is not at all
referred to, although this was explicitly stated in the TOR to be one of the tasks of the
ITF.
Secondly, hardly any mention (not to mention analysis) is made of
all the other business activities that TNL has become involved in over the years,
including in hotel operations, properties, travel bureaus, tour operations, and shipping
(through Swakop Lines and Namibia Shipping Lines). This, of course, also means, that the
Report does not cover (with the exception of properties and hotels) what should happen to
these operations in the future. In addition, the financial management of those funds that
are (such a substantial) part of the TNL assets has not been analysed at all (except for
making certain general statements, which are not being supported by any hard calculated
evidence).
As concerns the legal framework, the Report covers this in
Section 3.9, all in all 3 pages. While it is to be admitted that this framework is
exceptional, one would have expected from the ITF a careful presentation of this
legislation, including a listing of powers and duties, and an analysis of the governance
structure, an analysis of the regulatory instruments, with regard to economic aspects, and
safety aspects, etc. One would also have expected a careful comparative analysis by
considering the type of legislation that is normally used in many countries around the
world for establishing government-owned entities such as TNL. There is little of this to
be found in 3.9. This section basically just cites some of the paragraphs of the Act
essentially with the aim of simply dismissing it by, for example, saying that it provides
"for an almost complete legal system" for TNL with a set of provision on matters
that would otherwise be regulated by the General Criminal and Civil Law" (p. 89). The
ITF’s approach here is, however, in equal measure open to criticism; it does not
provide any form of analysis that would normally have been expected of an official
committee appointed by the Cabinet of the Republic of Namibia.
Notwithstanding this - and although I have no problems with the
Report’s recommendations for the re-structuring of the corporate structure of
TransNamib Limited - there are three areas of particular concern - of significant
importance to the future of of transport and all economic activities in Namibia, that
should be commented further upon at this stage, including (i) the analysis of the future
Namibian transport market; (ii) the implications of the proposed reforms for TransNamib
Rail; and (iii) the implications for the reform work currently undertaken by the Ministry
of Works, Transport and Communication-MWTC2000 effort, particularly as concerns the reform
of the road sector, including its financing.
2. The Future of the Namibian Transport Sector
It is clear that financially the railway and air transport
operations of TNL are in difficulties. This is not new. It is also clear that these
problems are not only caused by mismanagement. This is even supported by the evidence
referred to in the Report and by the German grant-financed DE-Consult-Report. The problems
of rail and air should therefore be explained primarily by the market situation, including
lack of traffic and strong competition. The key question is therefore, how will the market
situation change in the future.
Regretfully, the ITF does not present any analysis of how the
market for rail and air transport may develop in the future. Nor does it include any
analysis of the capacity offered by the present transport system available in the country,
including of the present capacity utilisation.
Notwithstanding this lack of analysis, the Report makes some
rather firm recommendations:
"It is very clear that the capital requirements in both the
transportation sector generally, and in TNL, in the next five to ten years, will be
massive. This relates both to the capital required for replacement investment in rail and
road, and for new expansional investment in rail, road, air and in logistics systems aimed
at boosting Namibia’s competitive position". (P. 103).
The main basis for making this claim appears to be the following
statement:
"Namibia is well placed to develop as a node or a
communication nerve centre especially in linking the Central and East African countries
with the rest of Southern Africa and to act as gateway for the landlocked neighbours in
the North and the East". (P. 29).
This is common knowledge. All our (and especially my personal
efforts since long before Independence until now) singles around the major question how to
cut the noose and boost Namibia´s transport lifelines and turn Namibia´s transport
axes from an unfavourable north-south direction into a more favourable east-west
orientation. Not one single figure or other form of data is used in the Report to
support this statement. Nor is any data supplied making the previous statement the least
credible through some form of economic analysis or by at least referring to other
authoritative studies, inter alia my own and many others.
Now, as the ITF apparently believe that there is a substantial
latent market out there waiting for being developed, they are also prepared to convey the
message that by exploiting these market opportunities, it will be possible for the rail
operations and also the air transport operations to become profitable in the future, and
indeed even so profitable that there would be scope for attracting private capital.
Although this is the objective we are all working for, inter alia the development of
the EPZ and the Walvis Bay Corridor as major development features for the future economic
development of Namibia, again, it has to be repeated, the Report contains no analysis
whatsoever to support this vision. There is no market analysis, and the Report does not
contain any financial forecasts of any kind that would be able to show that there is any
substance in these claims that profitability can be achieved trough market expansion and
how.
3. TransNamib Rail
Railways in Africa and also in Europe are generally poorly
managed; the explanation is straightforward. If you want to be successful in railways, it
has to be run on strict commercial terms.
No, this Report actually states that TransNamib Rail is
reasonably efficiently run and this is supported by other consulting investigations
(DE-Consult-Report). It is also empirically clear that although the operations of
TransNamib Rail are efficiently run and managed, a lack of visions and new ideas are
evident. Yet the Report recommends a fundamental restructuring of the arrangements in the
sector, one implication of which is that the actual railway operations are to be
transferred to a contractor (i.e. a different - in all probability an alien organisation).
No proper analysis of or justification for this proposal is provided.
The important aspect of this recommendation
is of a different nature, however; it threatens to pull apart an existing organisation
that everybody testifies is working efficiently. The fundamental problem is that the
Report does not present a convincing case for how to make the railway more profitable and
to improve their performance and service levels, and the views presented in Report about
the potential future of the Railway is not likely to be shared by many. There is therefore
a fundamental credibility problem.
This is aggravated by the sometimes negative language used in the
Report vis-a-vis TNL. People employed by TNL Rail must therefore be asking themselves:
What is my future? The impact of the recommendations of the Report is likely to undermine
the morale of TNL, which may easily lead to a departure by key personnel which cannot
easily be replaced. Now assume, the future for rail is not at all so rosy as stated by
ITF, so that there will not really be any investment interest from outsiders - foreign
private interest - to step in and take over the actual operations. This then simply means
the end to the railways in Namibia, in a very similar way as for Zambia Railways, TAZARA,
just to mention a few.
4. Restructuring of MWTC and the Road
Sector
Another reform recommended by the Report is the transfer of
rail infrastructure to the MWTC. This means the separation of rail operations from the
rail infrastructure. Although this approach is followed by some railways in Europe, it
however meets also severe criticism by many railway experts. The justification presented
in the Report of this reform action can be severely criticised, but this will not be done
here. I have my grave doubts whether this change can be efficiently sustained in the
Namibian "Economy of Scale situation". Suffice it to be stated that the MWTC
ever since Independence - and before mobilised and executed by the SWAPO-Party - has
worked on a completely different approach to infrastructure, whereby infrastructure would
essentially be managed by stand-alone organisations and financed through user charges
providing for cost-recovery. From this perspective the actual management of the rail
infrastructure by TNL Rail was seen as an appropriate arrangement, although lacking
forward vision. The infrastructure was not seen as a burden to TNL Rail either as most of
the investments in the railroad in fact has already been written off.
Now, if Government were to implement the
new proposals, it would turn around the thrust of the ongoing reform process, especially
with regards the road sector, almost totally. This would likely undermine the basis for
all the ongoing work within in particular the MWTC2000 project, and it would also give the
reform work a new direction that has little or no support within the professional cadres
of MWTC, including myself.
The MWTC2000 projects and the associated projects under this
heading, including the transfer of roads management to a new semi-independent Agency of
the State and the establishment of a Road Fund for achieving cost recovery and for
financing future activities in the road sector will then likely have been a effort in
vain. These activities were all already approved by Cabinet in principle. If this course
of action is now completely changed, this will pose a threat to the future of the roads
sector of Namibia, and the work done to date and financed jointly by both Namibia and
Sweden will have been of little use to the country.
In the light of my above preliminary and
initial remarks and after having studied the Report not in full depth in the short time to
my disposal, I therefore recommend to have another careful look into all the implications
resulting from the recommendations of the Report.
Dr. Klaus Dierks M.P.
Deputy Minister for Works, Transport and Communication
The above comment shows that the
railway ownership issue has serious implications on the efficient running and the
Turn-Around-Strategy of TransNamib Holdings Ltd. and the points of major concerns can be
summarised as follows:
| NEGATIVE IMPACT ON THE WORTH
OF THE COMPANY (LOSS OF INTRINSIC VALUE) WITH RESULTING LACK OF DEVELOPMENT FUNDS FOR THE
MODERNISATION AND NEW PROJECTS FOR NAMIBIA'S RAILWAY SYSTEM;
|
| LACK OF EXPERTISE IN THE
RAILWAY DIRECTORATE WITHIN THE MINISTRY OF WORKS, TRANSPORT AND COMMUNICATION WITH
RESULTING HEAVY DEPENDENCE ON PRIVATE CONSULTING ENGINEERS;
|
| OPTIMISED UTILISATION AND
MAINTENANCE LEVELS OF NAMIBIA'S RAILWAY SYSTEM CAN ONLY BE ACHIEVED IF THE MAINTENANCE
OPERATOR (TRANSNAMIB HOLDINGS LTD.) IS THE OWNER OF THE TRACK SYSTEM (THE OCCUPANT OF A
HOUSE LOOKS BETTER AFTER THE PLACE IF HE IS THE OWNER AND NOT THE LESSEE OF THE PROPERTY);
|
| SINCE TRANSNAMIB HOLDINGS LTD.
IS 100 PERCENT OWNED BY THE STATE, THE STATE REMAINS THE OWNER OF NAMIBIA'S RAILWAY
SYSTEM.
|
The argument for a change in railway ownership will be highlighted in
some more detail, especially as far the implications of the loss of intrinsic value for
the Company are concerned:
1. BACKGROUND
The practice of accounting for companies developed in a time when
inflation was not a common and noteworthy phenomenon, because the value of money stayed
more or less constant over time. This factor resulted in the concept of historic costs
being used as the basis for values in accounting, and in those days historic costs were
the actual costs of the day. This still apply today, because transactions are put to
book at the values of the transactions at the day it happened, but because of the fast
rate of depreciation of values through current high inflation rates, these actual costs
become historic in a relatively short time, and the higher the inflation rate the sooner
the transaction value becomes a historic value.
Bank transactions or credit worthiness of an asset are, however, based
on the current value of such asset and not historic costs. The difference between
the net worth at historic costs and the net worth at current prices is the intrinsic value
of any assets, and that is not shown in the traditional way in which accounting procedures
record transactions.
2. ACCOUNTING PROCEDURES IN THE CASE OF TRANSNAMIB
The appreciation of Namibia's railway assets happened over a century
(since 1897). The appreciation of the railroad asset has had a substantial increase in
value over time. TransNamib's auditors have certified, that the book values, which reflect
the historic costs, of the railroad in Namibia is currently equal to N$ 58 million.
However, to build this railroad today, which is referred to as the replacement cost, it
being the cost to re-create the asset at today's prices would now cost N$
4.764.000.000,00, as calculated by replacing 2 382 km of railway track at a current
estimated costs of N$ 2 million/kilometre. The intrinsic value of the railroad of
TransNamib holdings Limited, would therefore be worth N$ 4.706.000.000 and
would be a considerable fact in the net worth of the company.
If these assets were transferred at book value to the State as
contemplated in Section 13 of the National Transportation Services Holding
Company Act of 1998 (No. 28 dated 31.03.1999), the company would
be deprived of an economic worth of above amount.
3. THE IMPLICATIONS OF LOSS OF INTRINSIC VALUE FOR TRANSNAMIB
First and foremost the loss of the asset in a transaction where the
price is at strike at book value, reduces the intrinsic value of the company
substantially, directly at the benefit of the State. But, indirectly the State will suffer
because the state-owned company will loose out and so the State. The major
consequence is that the company's ability to attract either investment or borrowing is
immediately reduced. The level of intrinsic value establishes the financial standing of
TransNamib Holdings Limited with any financial institution. The ability to
attract funds or to borrow would be defined by the remaining intrinsic value, which may
still attach to properties which appreciated in value over time and rolling stock where
the replacement value exceeds the historic book value, but it is clear that the remaining
intrinsic value would not approach the amount inherit in the railroad. The road vehicle
fleet may also have some intrinsic value because even fully depreciated motor vehicles
still have an intrinsic value, albeit low.
Stripped of the major portion of its intrinsic value TransNamib
Holdings Limited will have difficulties raising funds for the projects envisaged by it,
such as the refurbishment of locomotives (including an assembly locomotive plant for
Namibia to assemble the "Afrosprinter") and the purchase of modern Diesel
Multiple units (DMUs) for improved and speedy passenger traffic as well as the replacement
of an older motor vehicle fleet. Furthermore with this reduced worth of the company
TransNamib Holdings limited will not be able to invest into the new corridor developments
(Walvis Bay Corridor (Trans-Kalahari and Trans Caprivi Links) as well as the Walvis
Bay-Lubango-Namibe Corridor with multimodal transport chains and seamless transshipments.
The National Transportation Services Holding
Company Act of 1998 (No. 28 dated 31.03.1999)(Section 13 (5)) requires further TransNamib
Holdings Limited to be solely responsible for the costs incidental to the maintenance of
the Namibian railways. The mere fact that the intrinsic value of this asset is lost to the
company will in time have an impact on the level of maintenance, simply because prudent
management dictates that money not be spent where it is of no benefit to the company. In
time the maintenance effort could be scaled down to the minimum required by the Railway
Agreement with the Ministry of Works, Transport and Communication and to the minimum
required to keep the track operational, since there would be no incentive to maintain the
intrinsic value of the asset, since the asset belongs to someone else. This would be
further compromised by the low utilisation of the rail, since this would create an
environment where the last dollar will be stretched to save on expenditure.
The final complication is that the company would
have been stripped of its major source of perceived value, which would disable its ability
to procure funds. It will then be in a position where it will to approach the State (the
owner of the company and the track) for the funding of developing projects, which may not
be the priority of the Ministry of Works, Transport and Communication and which is subject
to a lengthy budgetary process. The Act No. 28 of 1998 does provide for the reimbursing of
expenditure for services carried out by requirement of the State (Public Service
Obligation PSO) and a request was submitted to the State to carry the cost of maintaining
of idle capacity, but currently the expectation is that these matters will not be resolved
speedily and may even be rejected for lack of budget provisions.
It would be best for the intrinsic value of the
railroad to be left within TransNamib Holdings Limited, which would enable the company
to make its own financial arrangements for the future, but would also encourage it to
retain the condition and hence value of the asset.
ANNUAL STATEMENTS REFLECTING
TRANSNAMIB'S TURN-AROUND-STRATEGY
The Turn-Around Strategy of
2002 has been proved to be a great success. Within one year since 15.04.2002 (Commence of
the New Board of Directors under the Chairmanship of Dr. Klaus Dierks) the Company reached
from the huge losses during the Financial Year 2001/2002 and Break-Even position and since
2003 we are in a profit situation. While the Financial Year 2001/2002 still showed an
Income Loss of N$ 81 Mill, the Financial Year 2002/2003 (see below) showed a positive
Income of N$ 86 Million (see below. This happened without dismissing one member of
TransNamib's work force and with a simultaneous huge investment programme. The results for
the Financial Year 2003/2004 are N$ 20 Million which will be doubled in the current
Financial Year 2004/2005. This is reflected in the Annual Report statement for 2001/2002
and 2002/2003 below:
FINANCIAL YEAR 2000/2001
FINANCIAL YEAR 2002/2003
FINANCIAL YEAR 2003/2004
PRESS REFLECTIONS ON TRANSNAMIB'S
TURN AROUND ACTIONS
Die Republikein: 16.04.2002
The Namibian: 17.04.2002:
The Windhoek Oberver: 18.04.2002
|
