A Plan by TransNamib to hand-pick a Malaysian company to set up a rail factory and refurbish the parastatal’s locomotives in a deal worth more than N$1 billion has divided the government.
Two sets of Cabinet documents reviewed by The Namibian show that a company called SMH Rail Malaysian Company proposed to fund the N$1,1 billion project for seven years to renovate 33 TransNamib locomotives, but the government needs to provide a bank guarantee.
The other option for Namibia’s national railway operator is to obtain external funding worth N$1 billion to renovate the same number of trains for seven years, but the guarantee would be provided through its property portfolio.
Documents show that TransNamib wants to build the new renovation plant at Usakos.
SMH Rail Malaysian Company has been flirting with TransNamib to set up a train refurbishing factory in Namibia since 2013.
However, this proposal met stiff resistance from several ministers who believe that a clique of politicians and technocrats was favouring the Asian firm.
Deputy transport minister Sankwasa James Sankwasa is one of the supporters of the Malaysian company. He also visited the company’s factory in Zambia last year.
Another group, which includes public enterprises minister Leon Jooste, has called for this contract to be advertised in line with public procurement procedures.
Transport minister John Mutorwa told The Namibian two weeks ago that the Malaysian company will not receive special treatment, and it will have to bid for the contract like any other interested firm.
The previous TransNamib board accused Mutorwa of sidestepping them by writing directly to the parastatal’s chief executive officer, Johny Smith.
The former board believes that Smith finalised an agreement to buy land at Usakos for the factory without informing them.
A document titled ‘Financing proposal for the remanufacturing of TransNamib locomotives and the establishment of a locomotive factory by SMH Rail – Malaysian Company’ submitted to the Cabinet committee on treasury on 8 August 2018 provides more details about this deal.
The document submitted by Mutorwa states that TransNamib currently owns 79 trains, of which 43 are operational.
“The locomotive fleet currently deployed for operations is old and unreliable, with the average locomotive’s age being approximately 50 years. Locomotives are typically designed to last 20 to 25 years. This leads to numerous locomotive failures, and it negatively impacts rail operations, leading to poor business management,” the document said.
Cabinet was briefed on three options on how to deal with its old trains, which includes refurbishing old locomotives, and re-manufacturing or replacing old locomotives with new ones.
“The re-manufacturing option is being considered as it has the potential of supporting the manufacturing and employment- creation objectives of the country,” the document said.
Cabinet was informed that the re-manufacturing of the trains is a new way of extending their lifespan. This, according to the document, involves replacing all the parts and components of the old train with entirely new ones, except for the chassis, the fuel tanks and the wheels.
There is, however, a catch to this Cabinet submission. Sources said it heavily leans to giving this contract to the Malaysians on a silver platter.
“SMH Rail is currently the only known service provider in re-manufacturing locomotives. The project proposal is not only for re-manufacturing, but also to establish a factory for producing new locomotives for the local and export market”.
Sources familiar with the matter saw this as a blatant attempt to convince ministers that the Malaysian company was the best option.
The Namibian understands that Jooste questioned this plan last year since there are at least three companies in Africa which can provide the same services, including the South African state-owned rail operator, Transnet. Jooste declined to comment when asked by The Namibian about this matter.
Sources said several ministers clashed during a Cabinet meeting last year when some pushed for this transaction.
President Hage Geingob is said to have intervened, and questioned why some ministers were shutting down ministers who questioned why African companies were being sidelined.
Sources are using another letter written by Mutorwa on 21 December 2018 as evidence that the ministry is pushing for the Malaysian company.
Mutorwa wrote to TransNambib and copied in Geingob, prime minister Saara Kuugongelwa-Amadhila and other ministries such as finance, public enterprises and economic planning.
“I am writing this letter in support of the proposed establishment of the locomotives re-manufacturing plant for the town of Usakos, Erongo region,” the minister said in his letter.
Mutorwa stated that he supports the project because it is in line with the government’s Vision 2030 and the fifth National Development Plan (NDP5).
“Significant investments have been made in the railways by the government, and therefore it is important that complementary projects such as the re-manufacturing of locomotives are developed in the country to grow the capacity of our national railway operator, TransNamib,” the minister added.
Mutorwa said Swapo’s 2014 manifesto and Geingob’s Harambee Prosperity Plan supports a plan to fund this transportation system.
“The realisation of this project is through the government’s efforts of seeking international investments with our proactive and targeted approach to attracting high-quality investment projects, and therefore to fully utilise the domestic and international investment potential in support of the diversification process set out in the Growth-at-Home Strategy,” he reasoned.
“I would like to offer my unequivocal support for the establishment of a locomotive re-manufacturing facility at Usakos, in line with the industrialisation as well as the Growth-at-Home policies of our government.”
Mutorwa strongly denied claims that the Malaysian company had been hand-picked.
“I found the project when I came here, but there is no way the procurement laws will be by-passed to favour the Malaysian company,” the minister said during an interview with The Namibian two weeks ago.
He said the tender would be advertised.
The former TransNamib board, led by Paul Smit and lawyer Elize Angula, issued a statement last year, blasting deputy minister Sankwasa for political interference.
“When it comes to deputy minister Sankwasa, his blood is boiling simply because the board refused to adhere to his instructions to consider the unsolicited bid of SMH Rail Malaysian Company seeking to refurbish TransNamib’s locomotives,” the board stated.
TransNamib chief executive officer Smith declined to comment on this matter when approached two weeks ago.