Thursday, July 9, 2020

3 years later, Botswana Railways’s passenger train remains un-profitable

BY PORTIA NKANI

BR Express ÔÇô the nation’s only passenger train owned and operated by the Botswana Railways is reported to be bleeding the coffers of the state owned agency as it is not yet profitable.

The passenger train has been receiving a lot of patronage since its re-launch some few years ago and as such the Botswana Railways management is looking at making more improvements on it.

The state owned enterprise stated in its annual financial report that BR Express ÔÇô which runs from Lobatse to Francistown on a daily basis does not make profit from the service provision.

As it stands, the passenger train ÔÇô just like its predecessor ÔÇô Blue Train is offered to the community and nation at large on charity basis – in order to improve transportation and enabling the economy.

Acting Chief Executive officer, Chelesile Malele said the passenger train service only contributed as little as about five percent to the group’s revenue.

“The costs are very high, and it is bleeding the organization. We are having talks with the government to consider subsidizing and help acquire Diesel Multiple Units.”

As a result, Botswana Railways’s financial performance dwindled during the 2017/18 financial year also due to a decrease in traffic on the railway line.

The report also notes a combination of factors which contribute to the current financial position of the country’s sole provider of railway transport.

These includes amongst others: the decreased placement of orders from customers as a result of financial constraints, challenges in maintaining the rolling stock, the Lepashe (along Francistown to Sowa Pan rail line) wash away that resulted in major financial loss to the organization, long turn-around times of rolling stock resulting in inefficiencies for the organization and its customers, and shortage of locomotives.

Revenue for the year under review was P329, 8million which was below operational costs amounting to P350, 53million.

BR’s Board Chairman, Adolph Hirschfield indicated that management is working on several interventions to increase revenue from its railways operations through the implementation of an intensive marketing campaign to move freight transported by road to the railway line.

“This we believe will be achieved by exploring new product lines such as fast moving consumer goods, increasing rolling stock to service existing and future customers, reducing turn-around times of wagons within neighbouring railway authorities and eliminating inefficiencies within the system to offer a better quality,” said Hirshfield.

HOW OTHER SEGMENT PERFORMED

BR Properties

In the year under review, this property development arm of the Group’s business did not perform as expected due to the prevailing conditions in the property development market.

Chief Executive Officer, Leonard Makwinja wrote in his annual report statement that, however, prospects are imminent going forward after having agreements with the authorities in Francistown regarding the proposed mall on BR’s 11 hectare land. Makwinja indicated, “BR Properties has potential to grow in the coming years in a number of aspects. We further plan to construct malls in Mahalapye and Lobatse. The motivation comes from the fact that Rail Park mall has undoubtedly proven to be our current money spinner.”

Meanwhile, Malele said the BR Properties for the 2018 financial year showed some marginal profit of approximately P2million. The JTTM Properties (Pty) Ltd which operates Rail Park Mall contributed P150million dividend, according to Malele.

Freight business

Botswana Railways’ main revenue is freight business and the organisation’s overall performance in this aspect was subdued mainly due to lack of capacity to meet the demand. The biggest failure in this segment is spotted on imports, transporting of fuel from South Africa to Botswana which proves to be a huge challenge due to the fact that the rail tankers had some defects, consequently resulting in some disputes with some fuel companies. BR has since engaged a consultant to look into the whole fuel transportation system to find solutions.

Gabcon Business

Though being a joint venture between BR and Transnet, it remains another revenue stream for BR. The business is said to be doing well with potential to even do much better in future.

During the year under review Gabcon contributed to the Group revenue about P3million profit which is expected to be reinvested in building a freight village.

Sea Rail

This is potentially one of BR’s revenue streams and its performance was subdued in the year under review mainly because Sea Rail had no Board of Directors, therefore informed decisions were not made. According to the management, this has since been attended to and a Board has been appointed to spearhead its mandate. At the beginning of the financial year, the Dry Port had no equipment. However, this was later procured during the year. This segment has during the year under review made loss of approximately P5million.

Fracon business

This revenue stream, though a small business unit depends on Chinese business community in Francistown; in the year under review, the business unit took a tumble due to unfavorable trading conditions. On a positive note, Makwinja said the company has a strategic plan underway to revive Fracon notably being zooming into the Kazungula traffic. BR has a plot in Francistown for Fracon and the management sees it as the centre and transport hub in the Northern region.

INSIDE THE NEW BR STRATEGY

The Botswana Railways’ five-year strategy for 2014-2019 encompasses the following strategic themes: subsidiary and stakeholder management, customer centricity, business growth, safety and security, organizational efficiency and effectiveness. Major strategic initiatives included the maintenance of 210 wagons, procurement of eight locomotives, refurbishment of train stations in Francistown, Gaborone, Lobatse and the re-introduction of passenger train including the new commuter service between Gaborone and Lobatse. These projects were implemented as part of the company’s long-term strategy to become a leading provider in railway services within the region for domestic freight, passenger services and transit traffic bound for destinations within the Southern African Development Community region.

The BR management believes that railway is and remains the safest mode of transporting passengers and goods.

BR’s future is centered on developing additional railway lines from Mosetse to Kazungula and Mmabula Lephalale in South Africa. Although these projects have been on the pipeline for years now, both projects are still said to be at a preliminary stage of planning and are expected to alleviate the problem of anticipated growth in tonnage emanating from existing and new coal mines.

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Sunday Standard July 5 – 11

Digital copy of Sunday Standard issue of July 5 - 11, 2020.