Tazara overhauls management, targets $12m profit next year

Despite the problems that have recently threatened to cripple the Tanzania Zambia Railway Authority (Tazara), the authority is now focusing on making a $12 million profit in the next eight months, following the acquisition of four locomotives — two for shunting and two for mainline operations.

In the next 24 months, another 12 mainline locomotives will be procured, to boost and grow services and ensure the survival of the 1,860km long railway that forms an integral part of the Southern Africa regional rail transport network but has in recent times been threatened by debts.

The $12 million profit estimate is projected from a targeted haulage of 800,000 metric tonnes of cargo by June next year, up from 600,000 metric tonnes hauled last year.

The authority is also projecting a 20 per cent increase in passenger and parcel rates from July 2008 as part of the strategy to strengthen its operations.

Damas Ndumbaro, deputy managing director of Tazara, told The EastAfrican that the authority’s board of directors had also decided to put its house in order by overhauling its crisis-ridden management to steer the firm towards profitability.

Mr Ndumbaro said that Tazara’s problems do not stem from the operations side of the business rather, they were caused by theft and a management crisis, which the board is now dealing with. But Mr Ndumbaro could not give the previous year’s profits. Tazara’s total turnover stands at $35 million.

The railway company will also need to work out a common strategy with the Tanzania Port Authority (TPA) whereby the business community will be encouraged to use its services — a move that is expected to boost turnover further and reduce costs by 50 per cent in shortest time possible.

The two new mainline locomotives will supplement the existing 17 mainline locomotives, which are enough for Tazara to break even.

“The last board meeting resolution was that Tazara needs good management to operate and that the current locomotives are enough to break even. The new management has proved that,” said Mr Ndumbaro.

With 3,000 employees and a wage bill of Tsh1.8 billion ($1.4 million), the authority will use half of the expected $12 million projected profit to pay retirees who have taken the firm to court over $2.3 million terminal benefits dispute.

“Short term measures to improve performance are basically operational. We are reviving operational systems including increasing our tariffs and reducing loss of revenue. This has increased our performance,” said Mr Ndumbaro.

He defended the much criticised decision to cut down the number of passenger trains by saying it is purely a commercial decision and had nothing to do with operational constraints.

He argued that the passenger trains were a loss making business, thus it was more prudent to utilise the locomotives for freight, which pays more.

Fares on both the Express and Ordinary passenger trains have been increased by 20 per cent, while rates for parcels and luggage rates on the same trains will go up by 30 per cent.

Passengers travelling from Dar es Salaam to Kapiri Mposhi in Zambia or the Tazara Express on first class now pay $72, up from $60. Travellers to Makambako (Iringa) from Dar used to pay $24, now, they will pay $29.

Passengers destined for Rujewa (Mbeya) now part with $29 from $24. According to the Mr Ndumbaro, long-term measures to revive the line aim to recapitalise Tazara through loans from shareholders, banks and the Chinese government.  

“Our financial outlook currently is good. For instance, we are buying fuel on a cash basis and servicing the old debt on fuel. As of August, we owed our supplier $1.2 million, but to how, we owe them $0.32 million. We can meet our mandatory obligations because of the good financial outlook,” he said.

The firm was recently reputed to be on the brink of collapse owing to serious management problems. However, Mr Ndumbaro said Tazara could not collapse as its assets are worth billions of dollars.