National rail service provider TransNamib remains in a challenging financial position due to its short-term cash-flow position, as well as limited rolling stock capacity. Combined with a prolonged delay in spare parts, these factors are steadily exacerbating the rail operator’s woes.
New Era business journalist Maihapa Ndjavera (MN) recently conducted an exclusive interview with the CEO of TransNamib, Johny Smith (JS), for an in-depth look inside the national railway service provider.
MN: What is the current operational and financial status of the company?
JS: TransNamib remains in a challenging financial position due to its short-term cash-flow position, as well as its limited capacity in terms of rolling stock. Our ability to generate more revenue is heavily impacted by factors beyond our control. For example, in 2022, we ordered spares that we are still awaiting delivery. The delay in the delivery of spares has impacted our maintenance and made the historical backlog greater, which directly correlates to a decrease in operational capacity. Once we are able to execute our maintenance strategy, TransNamib will create more capacity in terms of the rolling stock, and increase our revenues. Thus, the immediate aim is to try and repair faulty and parked locomotives by obtaining the required spares in order to move additional freight.
MN: In terms of generating revenue, what can be the main source for TransNamib in the future?
JS: For TransNamib, freight remains the future. Our ability to move bulk break freight and affect the cost of moving goods, through economies of scale, remains unmatched. The potential for the organisation is great. As a company, we have focused our energies towards equipping ourselves to realise that potential in terms of capturing a greater share of the market.
MN: What progress have you made on the business turnaround strategy?
JS: We have managed to improve some of the matters of administration as well as strategy, which has now allowed the company to increase its business operations.
Some of the successes have been in terms of governance. TransNamib successfully hosted its first annual general meeting (AGM) in seven years in February 2020, and have been having annual general meetings on an annual basis.
The railway line between Aus and Lüderitz was opened after 18 years, and we are currently moving about 15 000 tonnes of manganese per month between Ariamsvlei and Lüderitz.
Through this initiative, we appointed about 150 new staff members in southern Namibia to support this project, which in turn has equally stimulated and created new economic activity in the south in general, and especially in Lüderitz.
This route has become a major revenue-generating source for TransNamib, and we are in the process of upscaling the tonnage of manganese moved to 30 000 tonnes per month, depending on our ability to increase our capacity in terms of rolling stock.
TransNamib Holdings Ltd and Botswana Railways (BR) signed an agreement, which will culminate in the development and operation of a container terminal in Gobabis.
Furthermore, this MoU serves as a short to medium-term partnership to connect the two rail companies via a rail and road intermodal service between Namibia and Botswana.
The intermodal linkage from Walvis Bay to Gobabis will, therefore, reduce the road transportation return trip with about 1200 km. A number of long-term agreements were cancelled, which were not in the interest of the company and did not create any value for the company. They were cancelled as they did not create any value for the company.
MN: What is the progress on the company’s business plan execution?
JS: Of course, we hoped to have achieved more in terms of the implementation of the business plan, but naturally no business is exempt from the effects of the micro and macro environment.
Throughout all our challenges, TransNamib has been resilient and remained focused on our vision, which is to turn around the fortunes of the company and become a sustainable organisation that adds value to the Namibian economy.
MN: Please point out some highlights on the company’s revenue history.
JS: For the 2018/19 financials, TransNamib presented its shareholder with the first and only unqualified audit in a period of more than 10 years.
During the 2018/2019 financial year, TransNamib generated revenue of N$517 million, which is an increase of 10.5% in revenue, year-on-year. Despite the challenge of rolling stock, TransNamib managed to attain its highest percentage increase in revenue in over a decade.
The progress, of course, was derailed by the Covid-19 pandemic and its impact on our revenue.
MN: What is the state of the country’s railway lines, and how much is needed for adequate maintenance?
JS: TransNamib, whilst the sole railway operator, is not the owner of the infrastructure. The rail infrastructure belongs to the government.
As the operator, we have experienced challenges in terms of the state of the infrastructure and the restrictions thereof on the business, and have engaged our shareholder closely by lobbying for continued investment in the upgrading of the rail infrastructure.
One such example is the current Walvis Bay–Kranzberg line rehabilitation, which once completed will have an immense impact on our ability to move more products within a shorter timeframe.
MN: What is your plan to get more passengers and freight onto trains?
JS: Our plan is to increase capacity. We know that the business is there; we only need to improve our locomotive capacity in order to be able to provide a reliable service to our passengers and customers.
The by-product of increased freight movement will be a regular passenger service. It needs to be understood that in terms of our revenue generation, freight is our revenue generator.
Essentially, we need to focus on the freight business so that we can generate income to purchase new rolling stock, and do the required maintenance so that we can provide a reliable passenger service.
MN: How has the company’s property portfolio been handled for the last two years?
JS: Our properties’ portfolio is valued at N$2.4 billion. Naturally, given our cash flow constraints, there is a backlog in terms of maintenance and improvements that could further positively impact the value of our properties’ portfolio.
MN: What was the outcome of the property auction that took place last year?
JS: The process in terms of the auctions have not been finalised. We have committed to sharing the outcomes with the media and the public once the process is finalised.
MN: What is the status of your labour relations? Did you manage to reach an agreement with the union, and what is the way forward?
JS: Our labour relations are stable. The management of TransNamib and the union have paved the way forward in terms of better working relations, and we will increase our engagement between the two parties to ensure that together we work better to turn around the company’s financial situation.
MN: Has any action been taken in terms of managers or executives who received fat bonuses in 2021 while the company was making a loss?
JS: Any issues that have been indicated in the EY Report will be addressed by the board, and they will be sharing more information on their action plan in terms of the report in due course.
MN: Have you received the auditor’s report regarding TransNamib management, and what issues have been raised in this report?
JS: The board has received the EY report from the Ministry of Public Enterprises, and will share more information on the way forward in due course.
MN: What is the status with the Challenge Air court case that was made against TransNamib?
JS: TransNamib would like to reiterate its stance that our organisation was not party to the settlement agreement entered into between Air Namibia and Challenge Air in 2019, in respect of the arbitration award. TransNamib will continue to defend its position through legal avenues.