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ZAMBIA RAILWAYS LIMITED (ZRL)

Theme: Great by Choice

“ZRL- Guarantees Safety and Business Growth”

STRATEGIC PLAN For The Period 2018- 2022

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Table of Contents

Table of Contents ............................................................................................................... 1

PREFACE .................................................................................. Error! Bookmark not defined.

Foreword ............................................................................................................................. 6

ABBREVIATIONS AND ACRONYMS ........................................................................... 8

Executive Summary .......................................................................................................... 10 THE STRATEGIC PLAN ................................................................................................... 10

CHAPTER 1 ...................................................................................................................... 13 1.1 Introduction ..................................................................................................................... 13 1.2 Institutional Review Framework .................................................................................... 14 1.3 Mandate of Zambia Railways Limited ........................................................................... 15 1.4 Governance of ZRL .......................................................................................................... 17 1.5 Management and Structure ............................................................................................. 18 1.6 ZRL Clients and Needs.................................................................................................... 18 1.6.1 Freight Service ............................................................................................................. 18 1.6.2 Passenger Service ........................................................................................................ 19

CHAPTER 2 ...................................................................................................................... 20 2 SITUATION ANALYSIS ................................................................................................ 20 2.1 Situation Analysis Framework ....................................................................................... 20 2.2 PESTELI Analysis ............................................................................................................ 20 2.3 SWOT Analysis................................................................................................................ 35 2.3.1 Internal Strengths and Weaknesses ........................................................................... 35 2.3.2 External Opportunities and Challenges ..................................................................... 36 2.3.3 Stakeholder Analysis .................................................................................................. 37 2.3.4 Strategic Engagement Plan ......................................................................................... 38 2.4 Strategic Issues ................................................................................................................. 39 2.5 ZRL Strategy Map ............................................................................................................ 41

CHAPTER 3 ...................................................................................................................... 42 3 STRATEGIC DIRECTION: VISION, VALUES AND MISSION ................................. 42 3.1 Our Vision ........................................................................................................................ 42 3.2 Our Values ....................................................................................................................... 42 3.3 Our Mission ..................................................................................................................... 43 3.4 Strategic Pillars and Key Result Areas (KRA) ............................................................... 43 3.5 PILLAR 1: Financial Stewardship and Viability ........................................................... 43 3.6 PILLAR 2: Customer Satisfaction ................................................................................... 44 3.7 PILLAR 3: Operational Excellence .................................................................................. 45 3.8 PILLAR 4: Strong Brand and Partnerships ..................................................................... 47 3.9 PILLAR 5: Human Capital and Capacity ........................................................................ 48

CHAPTER 4 ...................................................................................................................... 54 4 GOVERNANCE, INSTITUTIONAL FRAMEWORK FOR IMPLEMENTATION ...... 54 4.1 Governance ...................................................................................................................... 54 4.2 Institutional Arrangements ............................................................................................. 54

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4.3 ZRL Performance Reporting Flowchart .......................................................................... 55 4.4 Resource Mobilization, Financial Management and Procurement ............................... 55 4.5 Investment Estimates for 2018 – 2022.............................................................................. 56

CHAPTER 5 ...................................................................................................................... 57 5 PERFORMANCE MONITORING ................................................................................. 57 5.1 Introduction ..................................................................................................................... 57 5.2 Corporate Goals and Performance Metrics .................................................................... 58 5.3 Factors That Could Affect Goal Achievement ............................................................... 58

CHAPTER 6 ...................................................................................................................... 61 7 ANNEXES ........................................................................................................................ 65 7.1 Annex 1: PROJECTED YEAR ON YEAR KEY RESULTS FOR THE PLAN PERIOD . 66 7.2 Annex 2: Organization Chart .......................................................................................... 67 7.3 Annex 3: Comprehensive Profit and Loss Statement .................................................... 68 7.4 Annex 4: Cash Flow Statement ....................................................................................... 69 7.5 Annex 4: Statement of Financial Position ...................................................................... 70

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LIST OF FIGURES

Figure 1: Summary Balance Scorecard and Strategic Pillars .................................... 12

Figure 2.1: Linkages to the Sea Ports ........................................................................... 16

Figure 3.1 Stakeholder Map .......................................................................................... 37

Figure 2. 1: Strategy Map ............................................................................................... 41

Figure 2. 2 Summary Balance Scorecard and Strategic Pillars ................................. 43

Figure 4. 1: Performance Reporting Flowchart .......................................................... 55

Figure 4. 2 Investment Cost 2018 - 2022 ...................................................................... 56

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CHAIRMAN’S STATEMENT

This strategic plan is the new roadmap that ZRL will follow

to realize its vision of being the preferred regional rail

transport and logistics provider. The plan covers the period

from 2018 - 2022. I am greatly honoured to present this Plan

and also acknowledge the hard work and commitment of

our Management and staff, led by the Chief Executive

Officer in its preparation. This strategic plan articulates the

vision, mission, core values and the results of the ZRL. The

plan has outlined the objectives, strategies, targets to be achieved with the key

performance indicators to help measure the progress being made.

The Zambia Railways Strategic Plan (ZRSP) has been prepared through a consultative

process and has taken into account the need to harmonize ongoing reforms in the

transport sector, at the heart of this is draft National Transport Policy and the National

Transport Master Plan (NTMP). In preparing the strategic plan, the country‘s vision

2030, the Seventh National Development Plan (7NDP), Ministry of Transport as well as

the Industrial Development Corporation (IDC) strategies have been taken into account.

This strategic which plan builds and consolidates the gains from the previous plans

broadly aims at re-energizing ZRL towards improved service delivery, operational

efficiencies, strategic partnerships and brand awareness and becoming more financially

and commercially viable. This will be realized through five strategic pillars;

1. Financial Stewardship and Viability,

2. Customer Satisfaction,

3. Operational Excellence,

4. Strong Brand and Partnerships and

5. Human Capital.

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From the Board perspective, the thrust of ZRL next five years is to ensure sustainable

business practices that result in customer satisfaction and create value for the

shareholders. This requires a paradigm shift and mind set change among the ZRL staff

as well as ethical behavior, performance and accountability. It is my sincere hope that

ZRL staff and stakeholders will participate fully in this strategy execution to ensure the

realization of our vision.

Mr. Lubinda Linyama BOARD CHAIRPERSON

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Foreword by the Managing Director

This Strategic Plan provides a framework for ZRL action

during the next five years. Our theme is ―Great by

Choice‖ and reflects our commitment to awaken the giant

and continue to thrive as the preferred regional rail

transport and logistics provider. We have identified five

strategic goals and outcomes to be accomplished from

2018 through 2022. In the plan is reflected the guidance

provided by stakeholders during various workshops and

engagements. We have also built on ZRL‘s remarkable

success over the past decade.

In the next five years we have are focused to deliver customer satisfaction and

shareholder value by delivering the following key result areas;

i. Financial strength and sustainability;

ii. Safe and reliable delivery of quality service to customers and stakeholders;

iii. Competitive and reputable brand with strong strategic partnerships in the region

and internationally;

iv. Organizational strength and operational effectiveness, and;

v. Committed, competent and high performing workforce.

In the execution of this plan, we will demonstrate unwavering commitment to our core

values; teamwork, integrity, innovation, professionalism and service.

ZRL strategic plan is divided in five chapters;

Chapter one is the introductory part of the plan whereby the background of ZRL,

institutional review framework, mandate of ZRL, management and core functions and

client‘s needs are discussed. Chapter two speaks about the overall situation analysis

which is the thrust for the formulation of the strategic plan. Chapter three ends with the

cluster and analysis of the strategic issues and presentation of the strategy map

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highlighting four balance scorecard perspectives: financial, customer/stakeholder,

internal business process and organizational capacity.

Chapter three shares the vision, mission and values together with key result areas and

the strategic objectives of this plan. Chapter four is about how the plan will be

implemented; this chapter concentrates much on governance, institutional framework

and over all implementation arrangement. The last chapter is on how the performance

of the plan will be monitored.

In conclusion, we are involved in more demanding, complex, and interdependent work

with rapidly changing business models, processes, and technology. We need a thorough

understanding of the business value, cost, and impact on operational efficiency of new

requirements, investments, or Initiatives. The ZRL Strategic Plan 2018-22 will ensure we

make the needed investments and develop the initiatives to maximize our ability to

achieve our important mission.

Mr. Christopher C Musonda

CHIEF EXECUTIVE OFFICER

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ABBREVIATIONS AND ACRONYMS AG Attorney General

BBR Beit Bridge Bulawayo Railways

BoP Balance of Payments

BOZ Bank of Zambia

BR Botswana Railways

BSC Balanced Scare Card

Capex Capital Expenditure

COMESA Common Market for Eastern and Southern Africa

CDN Corredor De Densenvolvimento Do Norte, SA

CEAR Central East African Railways

CEO Chief Executive Officer

EAC East Africa Community

GAIN Notre Dame University Global Adaptation Index

GDP Gross Domestics Product

GRZ Government of the Republic of Zambia

HIV-AIDS Human Immunodeficiency Virus- Acquired Immunodeficiency

Syndrome

ICT Information and Communication Technology

IDC Industrial Development Corporation

IFMIS Integrated Financial Management Information System

KPI Key Performance Indicator

KRA Key Results Area

MP Member of Parliament

MoF Ministry of Finance

MoTC Ministry of Transport and Communications

MTEF Medium Term Expenditure Framework

NEAP National Environmental Action Plan

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NGO Non-Governmental Organisation

NRZ National Railways of Zimbabwe

NTMP National Transport Master Plan

PESTEL Political, Economic, Social, Technological, Environment (Physical)

and Legal

PPP Public Private Partnerships

NRDA National Railways Development Agency

RWUZ Railway Workers Union of Zambia

SoE State Owned Enterprise

SO Strategic Objective

SWOC Strengths, Weaknesses, Opportunities and Challenges

SWOT Strengths, Weaknesses, Opportunities and Threats

SADC Southern Africa Development Community

SARA Southern Africa Railways Associations

SI Statutory Instrument

SNCC La Société Nationale des Chemins de Fer du Congo Sarl

TAZARA Tanzania Zambia Railway Authority

TFR Transnet Freight Rail

TSR Temporal Speed Restriction

TWS Train Warrant System

UNFCC United Nations Framework Conversion on Climate

ZEMA Zambia Environmental Management Agency

ZDA Zambia Development Agency

ZFS Zambia Furnace Supplies

ZRA Zambia Revenue Authority

ZRL Zambia Railways Limited

ZRLSP Zambia Railways Limited Strategic Plan

7NDP Seventh National Development Plan

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Executive Summary

THE STRATEGIC PLAN

The strategic plan period is January 2018 - December 2022. However, the plan will be

implemented on a rolling basis and therefore emergent strategy, new and unforeseen

environmental threats will be accommodated through annual and midterm reviews.

The plan provides for a monitoring framework through the tracking of key indicators.

Zambia Railways Vision

To be the preferred regional rail transport and logistics provider.

Our Values

Team Work: WE value teamwork. We believe team work will sustain efficiency and

effective service delivery. We recognize the contribution and value of individuals in a

team.

Integrity: WE will do what we say we will do. We will up-hold professional and ethical

business practices. The company's interactions with stakeholders will be done

transparently for mutual benefits. We will ensure honesty, integrity and respect to all.

Innovation: WE are creative, bold and believe in continuous learning. We believe these

will sustain total quality consciousness in the organization.

Professionalism: WE uphold high quality standards and ethics in our dealings to

enhance professional competence by providing the highest level of service.

Service: WE believe in delivering excellent service and value to customers. We take time

to understand customers‘ needs and always strive to surpass customers‘ expectations.

Our Mission

To provide sustainable and competitive rail transport and logistics solutions to

customers and deliver shareholder value.

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Strategic Pillars and Key Result Areas (KRAs)

From the strategic issues, the following will be the plan‘s Strategic pillars and key result

areas in the balance score card perspectives. These will be the areas of impact for the

plan period.

STRATEGIC PILLAR 1: Financial Stewardship and Viability

KRA 1: Financial Strength and Sustainability

Strategic Objective 1.1: Increase Profitability

Strategic Objective 1.2: Optimize Resources

Strategic Objective 1.3: Improve Liquidity

Strategic Objective 1.4: Reduced Exposure to Enterprise Risks

STRATEGIC PILLAR 2: Customer Satisfaction

KRA 2: Safe and Reliable Delivery of Quality Service to Customers and Stakeholders

Strategic Objective 2.1: Improve tonnage traffic

Strategic Objective 2.2: Increase market share

Strategic Objective 2.3: Improve reliability and availability of the rolling stock fleet

Strategic Objective 2.4: Improve Customer Satisfaction

Strategic Objective 2. 5: Strong Stakeholder engagement

STRATEGIC PILLAR 3: Operational Excellence

KRA 3: Organizational Strength and Operational Effectiveness

Strategic Objective 3.1: Efficient and effective business processes

Strategic Objective 3.2: Improve train operations efficiency

Strategic Objective 3.3: Reduce derailments and accidents

Strategic Objective 3.4: Improve Infrastructure

Strategic Objective 3.5: Improved ICT infrastructure

STRATEGIC PILLAR 4: Strong Brand and Partnerships

KRA 4: Competitive and Reputable Brand with Strong Strategic Partnerships in the

Region and Internationally

Strategic Objective 4.1: Enhanced Corporate Reputation

Strategic Objective 4.2: Increase strategic partnerships

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Strategic Objective 4.3: Settlement of all cases for and against ZRL

STRATEGIC PILLAR 5: Human Capital and Capacity

KRA 5: Committed, Competent and High Performing Workforce

Strategic Objective 5.1: Improve Recruitment and Retention

Strategic Objective 5.2: Improve staff productivity

Strategic Objective 5.3: “Learning organization” culture nurtured and strengthened

The plan is summarized in the figure below, demonstrating how the pillars link with

strategic elements and the four perspectives of financial, customer and stakeholder,

internal business process and organizational capacity.

Figure 1: Summary Balance Scorecard and Strategic Pillars

To assist in tracking the progress during the implementation of the Strategic Plan, an

implementation matrix has been developed. It details the specific objectives, strategies,

activities, Service Delivery Target (SDTs) and Key Performance Indicator (KPIs).

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CHAPTER 1

1.1 Introduction The Zambia Railways Limited Strategic Plan (ZRLBP) outlines the strategic focus

during the next five years. This strategic plan has been developed by Zambia Railways

Limited (ZRL) in order to effectively undertake the mandate of ZRL and provide a

disciplined approach to the management of the company over the next five-year

horizon covering the period 2018 to 2022. This plan has been crafted after a period of

tremendous transformation in the operations of ZRL. The success and achievements of

the past also present future challenges. This perspective has been analysed and

addressed. It is on the basis of this performance that creates a need a road map for the

next five years. The plan seeks to provide a strategic framework for effective

organization, coordination and management of rail passenger and freight trains for five

years ending in 2022.

The plan begins with the review of the operating environment. This is meant to provide

a context, both historical and current realities, that will impact on the plan

implementation and provide a basis for the strategic options and choice. The seventh

national development plan is brought to attention as a reference point. The current

roles, functions, vision and mission of ZRL are restated. Against this background,

stakeholder and customer expectations have been analyzed to bring on board their

perspective. A SWOT analysis has been carried out to reflect both organizational and

institutional issues that need to be considered when crafting the strategies. Parallel to

this process, all critical and priority issues of strategic significance to ZRL have been

distilled and listed.

A new vision for ZRL has been agreed upon. This will be ZRL‘s new destination and

dream for the future. Supporting values have also been developed to guide ZRL

behaviour. To help us realize our dream is a new mission statement with an output

orientation.

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ZRL is entering a new growth phase, this therefore calls for management focus and

hence the need for this strategic plan. The plan will serve as a road map to measure our

successes and a fund-raising tool. The strategy will be reviewed on annual basis to

bring it in line with emerging challenges. Using this strategic plan ZRL will position its

self to be the preferred rail transport and logistics provider in the region.

In their very nature, strategic plans are directional in terms of thrust while

implementation details are elaborated in the annual action plans and budgets. This

plan therefore provides the high level view of the ZRL‘s work program in the next five

years. Stakeholders are important strategic partners in the implementation of this plan.

Consultations have been done during the preparation of the plan to get stakeholder buy

in and inputs on how ZRL can become more effective and efficient. The plan provides:

(a) review of institutional and policy environment (b) situation analysis including both

micro and macro environmental factors likely to positively or negatively impact on the

plan; (b) an analysis of the critical issues with a bearing on the plan (c) the ZRLBP

strategic direction: vision, values, mission and Key Result Areas, (d) the governance

and institutional framework for implementation and (e) performance monitoring.

The plan therefore reflects the strategic thinking of the board, management, staff and

stakeholders of ZRL. The ZRL Management owns the plan and will work with other

stakeholders to ensure the plan has wide ownership and is implemented. The ZRLBP

attests to the Board‘s commitment to provide leadership towards the provision of

sustainable and competitive rail transport and logistics solutions to customers and

deliver shareholder value.

1.2 Institutional Review Framework The elaboration of the ZRLSP is premised on the understanding that ZRL is the entity

being planned for. The ZRLSP has been prepared to act as a road map for conducting

business within the rail transport sector in Zambia and the region. The plan has been

developed taking into account the need to harmonize the National Transport Policy, the

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current Seventh National Development Plan, the Country‘s vision 2030 as well as the

Zambia National Transportation Master Plan. It has taken into account the outputs of

various workshops and meetings were held prior to the development of the plan.

The strategic planning process involved a team of external consultants who facilitated

data collection and discussion of the plan. ZRL Management, staff and stakeholders

were involved in structured interviews and workshops to provide inputs into the

process.

1.3 Mandate of Zambia Railways Limited ZRL is wholly owned by the Government of the Republic of Zambia through the

Industrial Development Corporation (IDC). The company is mandated under the

Railways Act to operate both rail passenger and freight trains. It was incorporated in

1982. The company has gone through different business cycles and restructuring. Up

until 2003, the company was a parastatal but privatized through concessioning to a

private entity called ―Railway Systems of Zambia‖. However, in September 2012, the

government rescinded its decision and repossessed Zambia Railways Limited from the

private entity due to the general deterioration of the rail infrastructure.

The company operates a total track length of 1,248km long single line of 1,067mm gauge

made up of the following track segments:

a) Mainline from Victoria Falls Bridge to Kitwe (848 km);

b) Branch Lines (214 km);

c) The Mulobezi Line (162 km); and

d) The Chipata- Mchinji Line (24 km).

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In the sub-region, ZRL is linked to almost all the ports in Southern Africa as shown in

the figure below.

Currently ZRL

employs around 950

employees with offices

dotted throughout the

rail network.

At present, ZRL owns

40 locomotives

(including 1 steam

locomotive) out of

which 20 locomotives

are operational leaving a total of 20 locomotives which are defective and extensively

cannibalised. In terms of wagons and carriages, the company owns a fleet of 2,094

wagons of various types out of which 1,200 are operational and 60 passenger coaches

(out of which 40 are operational).

The main workshops for heavy repairs, rehabilitation and maintenance of the rolling

stock are concentrated in Kabwe. Further, the company also has repair depots for its

rolling stock in Livingstone, Ndola and Kitwe.

Until the 1990‘s, ZRL was the main carrier of the bulk cargo and long distance

passengers. Today, trucks are the dominant transport mode. The resulting damage to

Zambia‘s roads and concerns over congestion, safety and environmental damage have

led to widespread calls for the Government to act and reverse the switch from rail to

road.

Figure 2.1: Linkages to the Sea Ports

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1.4 Governance of ZRL In terms of governance, ZRL is governed by the Railways Act, Cap 453 of the Laws of

Zambia, and is incorporated under the Companies Act, Cap 388 of the Laws of Zambia.

Furthermore, the Company is also governed by its Articles of Association and has to

comply with its provisions at all material times. Article 78 of the ZRL Articles of

Association provides that the composition of the Board Members shall at all times be

not less than five and not more than fifteen.

The Board provides strategic and tactical input to the ZRL senior management, in

determining the scope and relevance of ZRL‘s mandate, vision as well as its mission.

The company has developed and is implementing a board charter. The roles of the

Board and Management are distinct to avoid duplication. The Board is responsible to

the shareholder; Industrial Development Corporation (IDC) and policy maker; through

the Ministry of Transport and Communications (MoTC) for:

a) Firm value creation and payment of dividends;

b) Setting of strategic direction(s), monitoring of operational performance and

management processors and policies and compliance levels;

c) Integrity and quality of communication with stakeholders;

d) Appointing and disappointing ZRL Managing Director/Chief Executive Officer.

The Board is assisted in its functions by Board Committees and these are namely:

i. Finance and Administration Committee

ii. Technical Committee

iii. Audit and Risk Committee

The ZRL board has at its disposal a number of advisors that include; Ministry of

Transport, Attorney General, Ministry of Finance, Secretary to the Cabinet, Industrial

Development Corporation, Zambia Development Agency, Patents and Companies

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Registration Agency, Bank of Zambia, Institute of Directors and other government

agencies.

1.5 Management and Structure ZRL is led by the Chief Executive Officer who is appointed by and reports to the Board

of Directors with the latter being appointed by the IDC. The Ministry of Transport and

Communications appoints the Government Inspector of Railways (GIR) to oversee the

conformity of the operations of the railway sector according to the Railway Act. ZRL

reorganized the previous nine (9) directorates into (6) six to assist the CEO in the day to

day management namely;

i. Directorate of Finance

ii. Directorate of Legal Services (Company Secretary)

iii. Directorate of Operations

iv. Directorate of Technical Services

v. Directorate of Human Resources and Admin

vi. Directorate of Marketing

1.6 ZRL Clients and Needs Traditionally, ZRL has provided two transport services to its clients. These are freight

and passenger services.

1.6.1 Freight Service Block Train Service

This is designed for customers with large quantities of cargo to a single

destination.

System Trains

This service is for customers with single or multiple wagon loads traversing

over ZRL. These trains link the Southern and Northern Districts and also

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convey transit traffic between Southern Africa and Congo DR. A similar

service links the North and TAZARA and the port of Dar-e-Salaam.

Pick Up Trains

This is designed to serve farmers and other customers situated at wayside

stations.

1.6.2 Passenger Service Currently ZRL operates two (2) passenger trains on the mainline between

Livingstone and Kitwe, Mulobezi and Livinstone (mixed train) and the Lusaka

Commuter Train between Ngwerere and Lilayi (once a week); and

Currently provides long distance passenger services to an average 200,000 people

per year.

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CHAPTER 2

2 SITUATION ANALYSIS

2.1 Situation Analysis Framework The situation analysis has been done at two levels using PESTELI AND SWOT tools.

The macro environment has been analysed on three levels: global, regional and

national/local level. The analysis take account of the major Political, Economic, Social,

Technological, Environment, Legal and Industry analysis (PESTELI) development that

have taken place that are likely to impact ZRL‘s operations either positively or

negatively. Further, ZRL‘s Strength and Weakness as well as Opportunities and Threats

(SWOT) have been identified.

2.2 PESTELI Analysis The analysis using this tool shows a very fragile and uncertain international

environment for the next five years of the plan implementation. This is characterized by

both global politics and unpredictable economic environment. Global geopolitics are

likely to keep shifting, with greater integration of regions and realignment of countries

as they seek new sources of competitive advantage and greater integration in the global

economy. The politics-trade divide will narrow as countries move forward towards

convergence. US-China-India relations will be central in defining the new order in

global scene, and the US-Russia-China relations are likely to be redefined. This will

impact on transport and supply chain systems as new international trade disputes and

contract enforcement will call for new skills.

The World economy is expected to register low growth as developed economies

dynamics keep shifting. World growth is expected to rise from 3.1 percent in 2016 to 3.5

percent in 2017 and 3.6 percent in 2018. In Europe and the US, heightened political

activity and marshalling of massive resources towards fighting terrorism and

addressing other volatile areas will take a centre stage. In the East, China and other

emerging economies will continue to consolidate their positions in global economic

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arena. In Africa, attention will mainly be concentrated on realigning resources to focus

on key pressing issues such as health, education and infrastructure. The Sub-Saharan

economies will continue to grow at a rate that is likely to be higher than the world

average. The situation will impact on funding levels to the transport sector.

From a social and demographic front, developed economies will continue to have a

population age deficit with more elderly people coming into the scene. Africa will carry

on with a demographic and age dividend where a more youthful population which is

well educated join the employment ranks. This trend, while positive, may also create

higher unemployment levels and increase pressure on ZRL to employment more

people.

There are technological developments that will have a positive impact on management

of the world economies. New technologies in the mobile communications and

technology that is aimed at improving the delivery of commodities across many parts in

the world will receive more attention than before. E-supply chains systems will move

from nascent stage to more innovative systems of delivery of the entire logistics

solutions to the customers across continents.

The legal environment will be dominated by more dynamic laws which will demand

greater efficiency among institutions, increased accountability and prudence in the use

of public resources. In the case of African countries, the need for a new constitutional

order will grow. The new order is likely to lead to strict compliances by business.

The Industry environment is experiencing widespread change, driven by wide-ranging

and varied influences. With such a variety of changes comes both opportunities and

challenges. The following 9 key trends have been considered in shaping the ZRL 2018 –

2022 strategic plan.

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1. Climate Change

The current rail networks world-wide were designed and build using

historical records of climate and weather events. Now the ―inconvenient

truth ―of climate change makes these designs unreliable as basis for future

green field designs. Even small shifts in temperature and weather patterns

can cause rail tracks to expand and buckle, and may lead to more regular

repairs, speed restrictions, delays and disruptions. Storms can damage or

deposit debris on lines and at stations and floods or high-tides can

submerge them as well.

Therefore, the new green-field projects and refurbishments must be based

on plan with a different weather future, and built accordingly with a

‗predict and prevent‘ ethos looking forward rather than back. The ZRL

network as it plans to integrate the region must be built with the future in

mind rather than using templates of old which are no longer viable.

2. Urban growth

According to United Nations figures, 54% of the world‘s population lives

in urban areas. This population is projected to reach 66% by 2050. Zambia

is the most urbanised country in the region with circa 60% of the

population already living in the urban areas. There is a heavy

concentration of communities along the line of rail and this has led to

encroachments with some people occupying railway reserve land, leading

to vandalism of ZRL infrastructure.

Again the United Nations projects that urbanisation combined with

overall growth of the world‘s population could another 2.5 billion people

to urban populations by 2050, with circa 90% of the increase concentrated

in Asia and Africa.

The infrastructure therefore needs to be designed to absorb the inevitable

growth and be as efficient and as rapid as possible. Along with the

increased pressure comes increased opportunities such as a widening tax

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base that enables greater investment in public transport. An example

being the Crossrail project currently underway in London.

3. Rise of the start-ups

The entry into the industry of small, lean start-ups without the baggage of

legacy of obsolete equipment and systems presents a challenge for

traditional railways as well as an opportunity for PPP‘s for firms like ZRL

that are seeking to reinvent themselves into regional power houses of

logistic solutions.

These potential new competitors or partners don‘t play the conventional

rules of the business. Digital rather than physical solutions can be rolled

out in days or weeks, not months or years. And the perennial issues of

ticketing, overcrowding and train organisation are some of the issues in

the sights of start-ups.

4. Digitisation takes over

The internet of things (IoT) is enabling on-board sensors to deliver real

time analysis and monitoring, identify problems before they cause delays,

facilitate automated and preventative maintenance and ensure dispatchers

have an entirely accurate view of the train‘s location.

5. New players offering integrated travel and logistic solutions

There is a huge potential for rail, metro and truckers to provide travel

and logistic solutions. There are some who view the likes of Uber and Lyft

as the solution to the first-mile/last-mile challenge. Caution must also be

maintained that they don‘t become more attractive than railway transport.

And the performance of ZRL, particularly in payments and booking must

be improved to head off any such future threat.

6. Powered by difference energy sources

Globally there is increasing research to find possible replacements of

diesel for cleaner and greener energy. Options available include hydrogen

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and perhaps the most appealing, LNG, already being tested by some

railways and offering a competitive price and lower carbon emissions plus

an established regulatory structure when compared to its fossil and

renewable fuel rivals. Stations can be powered by solar.

7. The station becoming a destination

Rail stations are changing from being designed as an afterthought for

many city planners to places to stay and enjoy, an amenity in itself, rather

than a building to quickly head away from or arrive with little time to

spare before catching a train.

8. Long distance travel makes a return

A number of factors such as improvements to booking and ticketing

allied with high-speed trains and on-board service are widening the

uptake for trains to travel across the region.

Another trend helping support long distance rail travel, is the growth of

code sharing, long found in the aviation industry where a marketing

arrangement is created with an airline placing its designator code on a

flight operated by another airline and selling tickets for that flight in order

to strengthen or expand their market presence and competitive ability.

This is now being seen in an intermodal form in partnerships with the rail

industry. This kind of link-up between airlines and rail lines, known

formally as air-rail alliance or informally ―Rail & Fly‖ are increasingly

popular. They will form a major part of ZRL becoming the rail and logistic

solution provider of choice in the region.

9. High-speed and Hyper-speed rail

Whilst the hyperloop may currently lack the financial or political will to

make it a reality there is no doubt that super high-speed rail is a reality.

A more enlightened and educated citizenry will crave for more rights. This means that

the ZRL will be faced with enlightened customers demanding value for money.

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Table 2.1 that follows is a detailed analysis of the all the dimensions of PESTELI at global, regional and national/local levels. Table 2. 1 PESTEL Analysis

Dimension

Issues and/or developments that are likely to impact negatively or positively on ZRL’S capacity to achieve its objectives

Effects the changes present in terms of opportunities and threats to the sector

Globally Regionally Locally Opportunities Threats

Political Environment

At the global level, the election of President Donald Trump in USA has implications of American Policy on Africa potential impact of financial assistance to Zambia. The War on Terror, which for the past 11 years has cost an estimated US $ 11.5 trillion is a huge opportunity cost element that could affect

Establishment of the SADC Protocol on Transport, Communication and Meteorology with the region and the Southern African Railway Association (SARA). Implications: Member country including Zambia shall promote the establishment of cross boarder multimodal Corridor planning committee.

There is a stable political environment in Zambia. The political goodwill that has been cultivated in the past is expected to continue over the plan period.

At National level, continued Government support, strong political will to improving transport infrastructure: Implications

The political stability that Zambia has enjoyed since independence has created a conducive and stable business environment. This has further led to increased investment and international reputation and good will. In this regard, ZRL can exploit the good will position itself as a premier business provider of sustainable and competitive rail

As a State-Owned Enterprise (SoE) through IDC, ZRL will be impacted by government policy either directly or indirectly. Government policy through the ministry of Transport may affect directly ZRL and be contrary to the set objectives. ZRL must put in place systems that ensure that both the shareholder (IDC) and policy makers (MoTC) provide a favourable business operating

27

Dimension




funding priorities and global trade.

SARA is part of the SADC protocol on transport. It is a lobbying group for railway corridors linking ports in the region particularly with ZRL.

To transform the railway sub sector to an efficient, reliable, safe, and competitive transport mode with appropriate interfaces with the other modes of transport.

transport and logistics solutions to customers and deliver shareholder value

environment. These may include creating engagement platform for all stakeholders to be abreast with happenings in ZRL. Over reliance on government support will affect capacity of ZRL to finance operations and Capex

Economic Environment

At the global level, the price of copper has been up swing while the price of oil commodity has dropped. Implications: The export of copper will

At the regional level, Regional Economic integration gaining momentum, SADC, COMESA and EAC: Implications: closer cooperation

Export-driven growth will be supported this year by higher copper prices and demand. Tight credit conditions are expected to continue weighing negatively on

From 2015, there has been positive growth in the construction, transport and communication. The manufacturing sectors of the economy is expected to

The country‘s external debt stood at US$6.7bn in Sept 2016 with an overall Balance of Payment (BoP) deficit of US$432.3 m in 2015. The reserves accumulation stood at US$2.3bn during the same period.

28

Dimension




increase the forex while importation of fuel will result in forex exchange. General economic meltdown: Has also changed the foreign policies for most developed countries, with more focus on revitalising their domestic economies at the expense of foreign aid

in all aspects including movement of commodity. Another implication of greater economic regional integration is the possibility of joint action on regional logistics system. Regional integration has made Cross border trade to increase and this tends to increase tracking and travel away from home. This more business opportunity for ZRL.

domestic economic activity. We expect economic growth of 4.0% in 2017, which is unchanged from last month‘s forecast, and 4.6% in 2018. The Zambian economy has grown steadily in terms of Gross Domestic Product (GDP) since 2000 with an averages rate of 5%. This growth was accompanied by improving macroeconomic fundamentals such as inflations to a single digit, a relatively stable

record improved growth of 3.4% in 2017 owing to improved agriculture production for the 2017/2018 farming season, rebounding of the copper prices and stabilization of power supply situation. Government has been focusing on infrastructure development in in rail, air and road. In rail sector, cargo transported by rail reduced by 10.9% from 973, 427 Mt in 2015 from 1,092, 341 Mt in 2014. This is attributed to lack

The copper production recorded a marginal increase of 0.3% due to unfavourable metal prices where copper earnings dropped by 31.3% from the 2014 levels. Serious external risk remain specifically those linked to the country‘s dependence on Copper mining. Despite a challenging picture between 2014 to 2016, Zambia‘s economic prospects remain positives with GDP growth expected to continue above the global GDP growth rates. The economic environment is

29

Dimension




exchange rate and a general long term decline in interest rates.

of reliable and adequate rolling stock, poor state of rail track and competition from road haulage companies. The sustained bumper harvest in agriculture and the rebounding of the copper prices creates a opportunity for ZRL in terms of commodity movement.

therefore conductive for ZRL strategic goals.

Social Environment

Global Travel and connectivity brings up other challenges such as HIV and AIDS a global problem. There is more travel and

Regional trade results into exchange of skills, expertise and strengths to an organization. There is, therefore, need to leverage

Unemployment is mainly an urban youth issue with urban unemployment estimated at 15.3%. As a SoE, the job creation

There is a heavy concentration of communities along the line of rail and this has led to encroachments with some people

There is a heavy concentration of communities along the line of rail and this has led to encroachments with some people occupying railway

30

Dimension




interaction through tourism which impact on the cross-boarder business. Globalisation has brought about cultural influences that have an impact on work ethics and productivity.

and unlock value from the interaction with regional player. One of a topical regional issue is gender. Throughout this plan, we must view gender diversity is a virtue.

agenda must be firmly factored into overall strategy.

occupying railway reserve land, leading to vandalism of ZRL infrastructure. Trained and well qualified staff is available and there is abundant labour. The HIV epidemic remains a threat to this abundant labour.

reserve land, leading to vandalism of ZRL infrastructure. Trained and well qualified staff is available and there is abundant labour. The HIV epidemic remains a threat to this abundant labour.

Technological Environment Factors

Global trends have brought in new technologies. This has quickened the pace of research and development. Global trends have brought in new ICT communication systems changing

At regional level, Technology is being shared by countries and facilitating integration as well as access to information. The transportation and logistics industry has

Zambia‘s Vision for Information Communication Technology (ICT) is ―A Zambia transformed into information and knowledge based society supported by increased access to ICTs by all

With transport and logistics being at the heart of ZRL, developing new technology to improve processes is even more important with the way long distance

Zambia is not technologically advanced. However, globalization has meant that advances in technology elsewhere have an impact on the environment in Zambia

31

Dimension




the way we communicate and manage transport and supply chain systems.

Development of Telemedicine and e-medicine

traditionally been defined by trucks and infrastructure, but over the past several years technology has begun to change that.

citizens by 2030”. Achieving this vision, the Government identified the need to establish an ICT Center of Excellence as key in the realization of its vision. Advancements in the size and popularity of the e-commerce industry (such as cellular technology, fibre optic, e-government, mobile money, e-vouchers etc.) means that the pressures and importance of the supply chain

passengers and cargo are picked, packed, tracked and shipped all being made much quicker by using digital technology to speed up the process. The advancement in technology is poised to contribute to faster service delivery, increased market access and reduced cost of doing business. ZRL will play a role in this ICT expansion and will customise its services to be ICT relevant.

The transportation and logistics industry has traditionally been defined by trucks and infrastructure, but over the past several years technology has begun to change that. ZRL will need to keep in pace with all these changes to realise the strategic objectives set in this plan.

32

Dimension




working correctly for ZRL is more crucial than ever to determine its success.

Environment Factors

Zambia is a signatory to the Paris climate

accord which is an agreement within the United Nations Framework Conversion on Climate (UNFCCC) dealing with greenhouse gases emission mitigations, adaptation finance starting in

the year 2020. At global level,

In coming decades, the Southern African Development Community (SADC) region is expected to experience higher land and ocean surface temperatures than in the past, which will affect rainfall, winds, and the timing and intensity of weather events. SADC is committed to

The Zambian Government adopted a national conservation strategy in 1985 and the National Environmental Action Plan (NEAP) in 1994, in an attempt to redress the imbalance between development and environment. Environment is one of the three pillars of sustainable

In this regard, ZRL will look at how environmental issues and concerns will be addressed as the projects are further developed. Environmental considerations will be part of the criteria for selecting and investing in business projects.

Zambia was ranked 132nd out of 180 countries in 2016 for its climate vulnerability by the Notre Dame University Global Adaptation Index (GAIN). Zambia is highly exposed to climate change risks. The frequency and intensity of extreme events like droughts and floods in the past decade have affected agricultural season, impacting famers who are part of ZRL customer

33

Dimension




there is a shift towards use of environmentally friendly technologies. Global climate change, land Use patterns impacting on production systems and the way companies conduct their business.

several international conventions and regional programmes to provide guidance for climate change adaptation and mitigation. All SADC member states are party to the following conventions, UNFCCC, Ramsar Conversation on Wetlands, Conventions on Biological Diversity.

development. Therefore, for any investment or development project to be sustainable, the environment and issues surrounding the environment must be addressed.

base. Encroachment by squatters along the rail line leads to vandalism of the rail infrastructure. ZRL will develop risk migration risk to deal with these climate change uncertainties.

Legal Environment

International Conventions and Treaties are in place to coordinate global response

The COMESA Customs Union, launched in June 2009, has been justified at regional level as

The Railways Act provides for the vesting of the undertaking and assets of the Zambia Railways

The Governments focus on legal reforms that are pro-business means that the ZRL should be

As a limited company in Zambia, ZRL will be required to comply with wider sector specific regulations.

34

Dimension




In addition, at the global level, the Customs Union (COMESA) will facilitate the integration of the region into the world economy.

an essential condition for the sustainable development and integration of the region. It will increase commercial, financial and technological exchanges, which will in turn help the region to grow in a harmonious manner.

Board in Zambia Railways Limited; guiding on the winding up and dissolution of the Zambia Railways Board.

able to operate in a more business friendly legislative environment both in terms of legal compliance costs and number of regulations which it should comply with.

ZRL will also have to ensure it complies with relevant regulations, both national and regional treaties so that the investments are not placed at risk.

35

2.3 SWOT Analysis The second tool that was used is the Internal Strengths and Weaknesses and the

External Opportunities and Threats (SWOT) analysis. ZRL has many internal strengths

that can be used to leverage and mitigate the weaknesses. The strengths show an

organisation that is resilient and able to navigate the tough waters ahead. Nevertheless,

the weaknesses are also serious enough to warrant management attention. ZRL

management will become more proactive to neutralise or blunt the impact of internal

and external challenges.

2.3.1 Internal Strengths and Weaknesses Table 2. 2: Internal Strength and Weakness

Strength Weakness 1. More bulk carrying capacity than any other

mode of transport 2. Experienced employees in the rail sector

3. Linking the most economically active towns 4. Own rolling stock 5. Safety and Physical Security

6. Availability of vast amounts of low cost

land that can be utilized to enhance activities.

7. Good Industrial Relations

8. Established internal Controls and Governance Structure

9. Existing railway Infrastructure

10. Working Train Operations Management

System

11. Strong customer base

12. Flexible Pricing system

13. Membership to Regional Bodies (SARA, SADC, COMESA)

14. Known Brand

1. Poor state of the track

2. Rolling Stock that is not fit for purpose

3. Poor state of station buildings

4. Bureaucracy in price fixation

5. Low working capital

6. Inadequate ICT infrastructure and integrated systems

7. Long transit times

8. Underutilized ZRL land

9. Ageing experienced workforce

10. Poor public image

11. Human resource development programs

12. Loss making passenger sector

36

2.3.2 External Opportunities and Challenges There are opportunities in the operating environment that ZRL will take advantage of.

This will mean also dealing with external threats that are likely to undermine its

effectiveness. The analysis shows that ZRL has tremendous opportunities to take

advantage of and lessen the impact of the external threats. There are however threats

that are beyond control of management and these will be carefully monitored and

adjustment of plans made depending on their severity.

Table 2. 3 External Opportunities and Threats

External Opportunities External Challenges (Threats) 1. Introduction of SI 2. Growth in the Zambian Mining Industry

3. Growth in the economy and manufacturing sector

4. Government incentives in the agricultural sector

5. Growth in the DRC Mining sector and regional

economic growth

6. The PPP framework by the GRZ

7. The coming up of a dry port in Eastern Province and the development of greenfield railway projects such as linking of Chipata via Petauke to Serenje, Nseluka Mpulungu, Kafue- Lion‘s Den, Solwezi-Jimbe, etc

8. National Railway Development Authority (RDA)

9. Open access with TAZARA

10. Development of a National Transport policy

11. Planned construction of a private rail line in north

western province

12. ZRL is a holding Company of two (2) subsidiary companies in Southern Africa, namely, the interstate Emerged Railways Properties (ERP) and Pan African Minerals Development Company (PAMDC) which manage mineral rights in South Africa, Victoria Falls Bridge, Victoria Falls Hotel

1. One stop border posts at Chirundu, Kasumbalesa and Nakonde make road transport more convenient

2. Technological advancements in the transport sector as well as massive Investments by Road Transporters in their fleet.

3. Uneven playing field in the transport sector

4. Rampant vandalism and encroachments

5. Inability to control what is happening in the neighboring railways for example TAZARA and SNCC

6. The fluctuating copper prices as copper is the major commodity transported.

7. Political instability in DRC

8. Dependence on imports, exports and transits as major revenue contributors were we have little control

9. The link Zambia road project

10. Delayed finalization of the Transport Policy

11. The proposed policy on the introduction of multiple rail operators

37

2.3.3 Stakeholder Analysis A Stakeholder analysis was undertaken by staff and validated through a workshop

including external stakeholders. The main analysis shows that ZRL has very powerful

and influential stakeholders. All stakeholders exhibit very high interest in the work of

ZRL. This means we will continue to engage the stakeholders and capitalise on their

contributions. We have produced a stakeholder map that summarises the various

relationships. All stakeholders on quadrant for top priority need continuous

engagement, as well as those in secondary priority. The stakeholders on the low priority

are equally important being mostly NGOs and suppliers with an interest to do business

with ZRL. ZRL will continue to engage them on a need to know basis.

STAKEHOLDER MAP

Le

ve

l o

f P

ow

er H

igh

Keep Satisfied Keep Informed, involved and contributing

Regulator bodies

Ministry of Lands

Local Councils

House of Chiefs

ZEMA

Customers

IDC

Ministry of Transport

Employees

RWUZ

Media

Contractors/Suppliers

Internal Controls

ZRL Board

Public Procurement

Financial Institutions

Lo

w

Minimal Effort Keep Informed NGO‘s

Suppliers

Potential Investors

Trade associations

SARA

Land Squatters/Encroachers

Area MP

Ministry of Justice

Police Service

Low High

Level of Interest Figure 3.1 Stakeholder Map

38

2.3.4 Strategic Engagement Plan ZRL has drawn up a strategy in order to avoid being swayed and probably get off

course in light of powerful stakeholders. This plan, whose outline is shown below the

stakeholder matrix, will therefore be the main platform for engagement and financing.

Table 2. 4 Stakeholder Engagement Strategy

What Success will look like

Leadership Team ZRL Board / MoTC / IDC

Community / Customers

Involved in the planning and implementation of the ZRL 2018 – 2022 Strategic plan

Great return, value for money, positive media, satisfied public, status symbol for the country

Great amenity and logistics solution provider as able to provide end-to-end solutions

Involve Keep Informed Keep Satisfied Minimal Effort

Stakeholders: Stakeholders: Stakeholders: Stakeholders: Customers

IDC


Employees

RWUZ

Media

Contractors/Suppliers

Internal Controls

ZRL Board

Public Procurement

Financial Institutions

Potential Investors

SARA

Trade associations

Land Squatters / Encroachers

Area MP

Ministry of Justice

Police Service

Regulator bodies

Ministry of Lands

Local Councils

House of Chiefs

ZEMA

NGO‘s

Suppliers

Tools: Tools: Tools: Tools:

Website Meetings Reports Articles Online Articles Performance Reports Financial Reports Strategic plan execution

progress reports

Meetings

Reports

Newspaper Articles

Financial Reports

Regulatory returns

Reports

Articles

Newspapers

Website

39

2.4 Strategic Issues On basis of the Institutional and Situational analysis, it is imperative that the following

issues that are distilled be attended to during the plan period. Below are some of the

strategic issues for consideration in the ZRL Strategic Plan:

Table 2. 5: Strategic Issues

Clusters of Strategic Issues

Strategic Issues

Financial Viability and Sustainability Challenges

Failure to meet traffic and revenue targets Inadequate resources for maintenance and improvement of rolling

stock and railway infrastructure Inadequate working capital High operating costs Low debt collection Inadequate capacity to clear our debts

Operating Capacity Constraints and Quality Service Delivery Challenges

Transport Logistics Issues Inadequate capacity to offer total logistical solutions Inadequate terminal facilities Underutilisation of the available warehousing facilities Low rail market share compared to the road subsector for both

freight and passenger traffic Inability to capture growing non-traditional cargo

Infrastructure Poor state of the rail track Derailments and incidents Old and defunct train control monitoring/telecoms and signalling

system Poor state of station buildings, available warehousing facilities Lack of capacity to make improvements in maintenance methods

and procedures

Rolling Stock Lack of wagons for international traffic Poor state of the available wagons for local traffic Inadequate ancillary equipment Old rolling stock Low reliability of locomotives Low availability of locomotives Train operations Low train speeds and poor transit times Low traffic performance (traffic moved)

40

Clusters of Strategic Issues

Strategic Issues

Passenger Services Issues Poor and unprofitable Passenger service Inadequate rolling stock/ infrastructure capacity to operate

Passenger Services profitably

Strategic Partnerships and Branding and Reputation

Partnerships PPP option not fully exploited for providing solutions to ZRL

operating constraints Image Promotion/ Media Inadequate capacity to fully sponsor Kabwe Warriors FC Service Branding Inadequate public sensitization about the dangers of vandalism and

land encroachments

Organisation and ICT effectiveness and utilisation

Organisational structures issues Top heavy structure Slow and ineffective implementation of decentralisation of company

operations ICT Inadequate ICT infrastructure Low utilization of existing ICT infrastructure in company operations Lack of structured onboarding processes for new ICT initiatives Our processes are manual

Security/ Legal Rampant vandalism and theft of railway infrastructure and rolling

stock and land encroachments Inability to secure our operating premises well due to lack of

adequate resources Unresolved litigations for and against the company

Human Resource Capacity

Competent work force Implementation of the merit based remuneration Inadequate skills development (re-skilling) Low employee productivity Low appetite by employees to explore and adopt new approaches Inadequate performance management system Inadequate Succession plan Retirees

The analysis of the issues above can be clustered into four strategic themes as captured

in the strategy map in figure 2.1 below as follows:

41

2.5 ZRL Strategy Map

Figure 2. 1: Strategy Map

42

CHAPTER 3

3 STRATEGIC DIRECTION: VISION, VALUES AND MISSION This section covers the main Plan and is informed by analysis of previous chapters. The

strategic direction that ZRL will take is already predetermined in the 7NDP, IDC

strategy, National Transport Master Plan and National Transport policy. The ZRLSP is

therefore an effort to domesticate for ZRL its precise role in consideration of both the

micro environment within ZRL and its operating environment externally. The following

Vision and Mission statements are supporting the achievement of the Seventh National

Development Plan (7NDP) which is in line with the Zambia Vision 2030.

3.1 Our Vision To be the preferred regional rail transport and logistics provider.

3.2 Our Values

Team Work

WE value teamwork. We believe team work will sustain efficiency and effective service

delivery. We recognize the contribution and value of individuals in a team.

Integrity

WE will do what we say we will do. We will up-hold professional and ethical business

practices. The company's interactions with stakeholders will be done transparently for

mutual benefits. We will ensure honesty, integrity and respect to all.

Innovation

WE are creative, bold and believe in continuous learning. We believe these will sustain

total quality consciousness in the organization.

Professionalism

WE uphold high quality standards and ethics in our dealings to enhance professional

competence by providing the highest level of service.

43

Service

WE believe in delivering excellent services and value customers. We take time to

understand customers‘ needs and always strive to surpass customers‘ expectations.

3.3 Our Mission To provide sustainable and competitive rail transport and logistics solutions to

customers and deliver shareholder value.

3.4 Strategic Pillars and Key Result Areas (KRA) The plan is summarized in the figure below, demonstrating how the pillars link with

strategic elements and the four perspectives of financial, customer and stakeholder,

internal business process and organizational capacity. These will be the areas of impact

for the plan period.

Figure 2. 2 Summary Balance Scorecard and Strategic Pillars

3.5 PILLAR 1: Financial Stewardship and Viability KRA 1: Financial Strength and Sustainability

Strategic Objective 1.1: Increase Profits

44

Strategies:

Increase customer base by providing competitive rates

Restore track and rolling stock condition

Acquire new equipment

Increase ZRL‘s gross revenue generation from USD 20 Million to USD 128million

per annum over the plan period

Strategic Objective 1.2: Optimize Resources

Strategies:

Manage and reduce man power related costs

Reduce fuel cost by implementing fuel management systems

Improve operational efficiency

Strategic Objective 1.3: Improve Liquidity

Strategies:

Intensify debt collection

To achieve 90% debt collection starting in 2018

financial discipline

Constant engagement with debtors and creditors.

Engaging potential financiers, banks, cooperating partners, stakeholders

Strategic Objective 1.4: Reduced Exposure to Enterprise Risks

Strategies:

Percentage of risks above the tolerable category as per risk register

Dismantle the debt owed to former employees in two years with a 50% reduction

YoY

3.6 PILLAR 2: Customer Satisfaction


Strategic Objective 2.1: Improve tonnage traffic

Provision of competitive rates through special discounts

Promotional rates

45

Backhaul rates/ through rates

prioritize long haul movements to

Strategic Objective 2.2: Increase market share

Offering reliable and competitive services

Enactment of SI

Intensified direct marketing, advertising

Acquire 3,100 new wagons, 40 new locomotives and 40 new passenger coaches

Lease to own

Hire

Improve service delivery (acquisition of new coaches, increase passenger train

speeds to 100km/h)

Strategic Objective 2.3: Improve reliability and availability of the rolling stock fleet

Strategies

Acquire 3,100 new wagons and new 40 locomotives/

Secure funding/ Lease to own/Hire

Remanufacture Locos

Rehabilitate existing fleet

Restore and upgrade track condition

Provide adequate rolling stock/ infrastructure capacity

Strategic Objective 2.4: Improve Customer Satisfaction

Strategies:

Increase customer base by providing competitive rates

Strategic Objective 2.5: Strong Stakeholder engagement

Strategies:

Maintain good relations with government and all other stakeholders

3.7 PILLAR 3: Operational Excellence KRA 3: Organizational Strength and Operational Effectiveness

Strategic Objective 3.1: Efficient and effective business processes

46

Strategies:

Timely implementation of projects

Create high performance work culture

Re-align the organizational structure in line with the business demands by 2018

To implement the decentralization of company operations by Dec, 2018

Strategic Objective 3.2: Improve train operations efficiency

Strategies:

Reduce average transit time for freight trains from 72 hours to 20 hours by 2022

Passenger transit time on mainline to 12 hours

Reduced fuel usage by intensifying the implementation of fuel management

systems

Reduced wagon and locomotive turn around periods

Prioritization of long haul movements

Strategic Objective 3.3: Reduce derailments and accidents

Strategies:

Full track rehabilitation

Upgrade the train control monitoring/telecoms & signaling system

Install Signaling and Train Telecommunications System

Strategic Objective 3.4: Improve Infrastructure

Strategies:

Rehabilitate and upgrade all station buildings, ware housing facilities, etc

Secure appropriate funding

Achieve 100% OSH compliance and quality standards by 2022

Undertake full rehabilitation of the railway infrastructure

Install Signaling and Train Telecommunications System

Strategic Objective 3.5: Improved ICT infrastructure

Strategies:

• Acquire and utilize ICT

• Implementation of train Management systems

47

• Operationalise Sage ACPACC ERP

• Human Resource management systems

• Planned maintenance management system

• Enhance utilization of ICT in company operations

3.8 PILLAR 4: Strong Brand and Partnerships

KRA 4: Competitive and Reputable Brand with Strong Strategic Partnerships in the

Region and Internationally

Strategic Objective 4.1: Enhanced Corporate Reputation

Strategies:

Increased visibility of ZRL

Enhanced Stakeholders' satisfaction

Attain International Quality Service Certification (ISO) by Dec 2022

Strategic Objective 4.2: Increase strategic partnerships

Strategies:

Secure funding for feasibility studies beginning in 2018

The utilization of ZRL bare land by developing modern structures

The development of Inter-modal terminal facilities

Commercialization of the Kabwe workshops

The development of a concrete sleeper factory

The running of the Lusaka Commuter Train

Establishment of quarry plant in Nankunko

Strategic Objective 4.3: Settlement of all cases for and against ZRL

Strategies:

Ensure that ZRL acts in accordance with the governing laws of Zambia and

regulations so as to reduce the number of lawsuits.

Ensure that ZRL is compliant to all laws and statutes

48

3.9 PILLAR 5: Human Capital and Capacity KRA 5: Committed, Competent and High Performing Workforce

Strategic Objective 5.1: Improve Recruitment and Retention

Strategies:

To develop an attractive and competitive reward system

Implement a merit based remuneration system by 2018

Implementation of employee performance appraisal

Review pay regularly with periodic assessments of salary marketplace

Strategic Objective 5.2: Improve staff productivity

Strategies:

Implement training and development plan

Implement effective recognition and reward system

Create a conducive work environment

Sustenance of industrial harmony

Strategic Objective 5.3: “Learning organization” culture nurtured and strengthened

Strategies:

Implementation of training & development programmes

Mentorship programmes

Succession plan to be 100% in place and implemented

To assist in tracking the progress during the implementation of the Strategic Plan, an

implementation matrix has been developed. It details the specific objectives, strategies,

activities, Service Delivery Target (SDTs) and Key Performance Indicator (KPIs) as

below:

49

KRA 1: Financial Strength and Sustainability

BSC Perspective

Strategic Objectives

Strategies KPI Service Delivery Target

Responsible Directorate

Financial Stewardship Perspective

Increase Profitability

- Increase customer base by providing competitive rates

- Restore track and rolling stock condition - Acquire new equipment - Increase ZRL‘s gross revenue generation

from USD 20 Million to USD 128million per annum over the plan period

- Annual Revenue - Freight revenue of USD123 million by 2022

- Passenger Revenue of USD3 million in 2022

- Estates revenue of 2 million by 2022

Marketing

Optimize Resources

- Manage and reduce man power related costs

- Fuel cost by implementing fuel management systems

- Improve operational efficiency

- O&M ratio and G&A to revenue ratio

- Dismantle debt owed

to former employees in 2 years

- Company operational cot to revenue ratio (maximum cost to income ratio) of 90% beginning 2019

- 0 Debt by end of 2021 Q2 (10% reduction per quarter for 10 quarters)

Operations Finance

Improve Liquidity - Intensify debt collection - To achieve 90% debt collection beginning

2018 - financial discipline - Constant engagement with debtors and

creditors. - Engaging potential financiers, banks,

cooperating partners, stakeholder

- Rate of debt collection

- Debtors Days

- Creditors days

- Compliance

- Resource mobilization

- 90% debt collection beginning 2018

- Reduce debtors‘ days to 30 beginning 2018

- Reduce creditors days to 45 days

- Achieve 100% compliance in terms of statutory returns and payments

-

Finance

Reduced Exposure to Enterprise Risks

- % of risks above the tolerable category as per risk register

- - Audit and Risk

50


BSC Perspective




Customer and

Stakeholder Perspective

Improve tonnage traffic

- Provision of competitive rates through special discounts

- Promotional rates - Backhaul rates/ through rates - prioritize long haul movements to

- Aligned Rates

- Tonnage moved / annum

- Strategy aligned Rate Sheets by Q1 of every year

- 1.2 million tons in 2018 - 1.9 million tons in 2019 - 2.8 million tons in 2020 - 3.6 million tons in 2021 - 4 million tons in 2022 - Minimum 400km/ton over

the plan period

Marketing Operations

Increase market share - Offering reliable and competitive services

- Intensified direct marketing, advertising

- Enactment of SI - Acquire 3,100 new wagons, 40 new

locomotives and 40 new passenger coaches

- Secure funding - Lease to own - Hire

- Improve service delivery (acquisition of new coaches, increase passenger train speeds to 100km/h)

- Market Share per service offered

- # of Marketing Campaign / year

- Approved SI - Acquisition of New

Rolling Stock

- Passenger speed of 100km/hr by 2021

- Market share of 30% by 2022

- Approved marketing plan in Q1 of every year

- SI Delivered by Q2 2018 - 700 wagons by 2018 - 1,700wagons by 2019 - 2,200 wagons by 2020 - 2,800 wagons by 2021 - 3,100 wagons2022 - 14 new locos by 2019 - 40 new locos by 2022 - 40 coaches by 2020 - At least 10km/hr

improvement/year

Marketing Legal Technical Services Operations

Improve reliability and availability of the rolling stock fleet

- Acquire 3,100 new wagons and new 40 locomotives/

- Secure funding/ Lease to own/Hire - Remanufacture Locos - Rehabilitate existing fleet - Restore and upgrade track condition - Provide adequate rolling stock/

infrastructure capacity

- Loco Reliability - Loco Availability - Wagon Availability - Increased passenger

ridership

By 2022 - Reliability of

10,000km/failure - Availability of 80% - Speeds of 100km/h for

passenger by 2022 - 30 coaches by 2020

Technical Services Operations Technical Services

Improve Customer Satisfaction

- Increase customer base by providing competitive rates

-

- Customer retention Surveys

- Customer Satisfaction Surveys

- Customer retention of 80% over the plan period

- Customer Satisfaction of 85% by 2021

Marketing

Strong Stakeholder engagement

- Maintain good relations with government and all other stakeholders

-

- Stakeholder satisfaction index - Stakeholder Satisfaction Index of 85% by 2021

Public relation

51

KRA 3: Organizational Strength and Operational Effectiveness BSC Perspectives




Internal Business Process

Perspective

Efficient and effective business processes

- Timely implementation of projects - Create high performance work culture - Re-align the organizational structure in line

with the business demands by 2018 - To implement the decentralization of

company operations by Dec, 2018

- Projects deliverables overdue

- New Organisation structure

- Decentralised model

- <10% Project deliverables overdue

- Organisation Structure deployed by Q2 2018

All Directors

Improve train operations efficiency

- Reduce average transit time for freight trains (L/Stone-Ndola) from 72 hours to 20 hours by 2022

- Passenger transit time on mainline to 12 hours

- Reduced fuel usage by intensifying the implementation of fuel management systems

- Reduced wagon and locomotive turn around periods

- Prioritization of long haul movements

- Transit time - Fuel consumption

index - Average distance

covered per ton

- 20 hours on the mainline for freight trains by 2022

- 12 hours for passenger trains on mainline by 2022

- 0.014 L/NTK over the plan period

- Wagon and Loco Turn Around times

- Minimum of 400km/ton over the plan period

Operations

Reduce derailments and accidents

- Full track rehabilitation - Upgrade the train control

monitoring/telecoms & signaling system - Install Signaling and Train

Telecommunications System

- Achieve almost zero derailments

- 100% Safety and economic means of controlling train movements

- Full rehabilitation of entire network

- Restoration of old equipment

- Acquisition of new rolling stock by 2022

Technical Services

Improve Infrastructure

- Rehabilitate and upgrade all station buildings, ware housing facilities, etc

- Secure appropriate funding - Achieve 100% OSH compliance and quality

standards by 2022 - Undertake full rehabilitation of the railway

infrastructure - Install Signaling and Train

Telecommunications System

- Upgrade of station buildings and infrastructure

- Average train speeds

- All buildings by 2022 - Safety and

environmental compliance of 100%

- 80-100km/h for freight & passenger trains by 2022

Technical Services Technical Services

Improved ICT infrastructure

- Acquire and utilize ICT - Implementation of train Management

systems - Sage ACPACC - Human Resource management systems - Planned maintenance management system - Enhance utilization of ICT in company

operations

- Over the plan period Operations

52

KRA 4: Competitive and Reputable Brand with Strong Strategic Partnerships in the Region and Internationally

BSC Perspective




Internal Business Processes

Perspective

Increase strategic partnerships

- Secure funding for feasibility studies beginning in 2018

- The utilization of ZRL bare land by developing modern structures

- The development of Inter-modal terminal facilities

- Commercialization of the Kabwe workshops

- The development of a concrete sleeper factory

- The running of the Lusaka Commuter Train

- Establishment of quarry plant in Nankunko

- Implementation of the projects identified for PPP over the plan period

- Implementation of the projects identified for PPP over the plan period

Corporate Planning / Procurement and Supplies.

Settlement of all cases for and against ZRL

- Ensure that ZRL acts in accordance with the governing laws of Zambia and regulations so as to reduce the number of lawsuits.

- Ensure that ZRL is compliant to all laws and statutes

- Reducing no. Old Cases per year (10% reduction / Quarter)

- No. of new Cases per year

- Old Case disposed of by Q2 2019

- Less than 2 new cases per year

Legal Legal

Enhanced Corporate Reputation

- Increased visibility of ZRL - Enhanced Stakeholders' satisfaction

- Attain International Quality Service

Certification (ISO) by Dec 2022

- Rebranding of ZRL - Customer Satisfaction

Index

- ISO certification

- Completed rebranding Program by Q4 2018

- Customer Satisfaction Index improvement of 10% per annum

- Half yearly progress report

Marketing Public Relations Legal Services

53

KRA 5: Committed, Competent and High Performing Workforce

BSC Perspectives




Organization

al Capacity

Improve Recruitment and Retention

- To develop an attractive and competitive reward system

- Implement a merit based remuneration system by 2018

- Implementation of employee performance appraisal

- Review pay regularly with periodic assessments of salary marketplace

- New reward system in place

- Development of incentive schemes

- Job evaluation - Salary surveys

- Yearly Employee

Opinion Surveys (EOS)

- Rate of attrition

- Approved reward system by Q1 2019

- Job evaluation results

and Salary surveys by Q1 2019

- EOS Index of 85% by 2022

- Attrition of less than 4% annually

Human Resources and Administration Public Relations HRA

Improve staff productivity

- Implement training and development plan - Implement effective recognition and

reward system - Create a conducive work environment - Sustenance of industrial harmony

- Develop training effectiveness index

- Performance management system

- Employee productivity ratio

- Annual leave plans

- Index of 85% per annum

- 100% smart performance contracts up to Manager level Q1 of every year

- Productivity ratio of 2300tons/employee per annum by 2022

- Revenue productivity ratio of USD74,000 per employee per year) by 2022

- 90% adherence to annual leave plans

Human Resources and Administration

―Learning organization‖ culture nurtured and strengthened

- Implementation of training & development programmes

- Mentorship programmes - Succession plan to be 100% in place and

implemented

- No. of employees under-going training/month

- Succession Plan

- 80% against training plan

- Annual approved succession plan by Q1 of every year

Human Resources and Administration

54

CHAPTER 4

4 GOVERNANCE, INSTITUTIONAL FRAMEWORK FOR

IMPLEMENTATION

4.1 Governance

The key Champion in ensuring the implementation of the strategic plan rests with the

top leadership in any organization. In the case of ZRL, the Chief Executive Officer

(CEO) will take the overall responsibility of ensuring that the plan is successfully

implemented. The CEO will be supported by the six directorates who will be in charge

of all operational aspects of the plan implementation. These include the:

a. Directorate of Finance

b. Directorate of Legal Services (company Secretary)

c. Directorate of Operations

d. Directorate of Technical Services

e. Directorate of Human Resources and Admin

f. Directorate of Marketing

Various governance structures and support functions in ZRL will work in harmony to

ensure smooth implementation of the plan.

4.2 Institutional Arrangements

To ensure smooth implementation of the Plan, the Strategic Plan Implementation

Committee (management team) will be charged with the responsibility of ensuring that

the strategic plan is cascaded to directorates and other departments in ZRL. The

Corporate Planning Department will be tasked to ensure that ZRL‘s key results areas

and strategic objectives are aligned to ZRL vision. The Corporate Planning Department

will liaise with other departments and sections to support this goal. It is envisaged that

there will be a champion to spearhead each of the Key Result Areas in the plan. An

organisation structure that will support this strategy is annexed to this plan.

The reporting system is diagrammatically presented below:

55

4.3 ZRL Performance Reporting Flowchart

Figure 4. 1: Performance Reporting Flowchart

To further support performance monitoring, a ZRL M&E Plan and System will be

developed and institutionalized. The Corporate Planning team will lead the process of

developing an M&E framework for the plan. The M&E plan will have a detailed set of

indicators against which data will be collected at various levels. This strategic plan has

provided the key performance indicators as a starting point to support data gathering

4.4 Resource Mobilization, Financial Management and Procurement

Financing of this strategic plan will be informed by the MTEF and annual budget cycle

in line with the fiscal year for the Republic of Zambia. ZRL will adopt a proactive

approach to engage the IDC and the GRZ to leverage Government funding. To

compliment this, support from development partners will be sought. It is anticipated

that development partners will be approached to support ongoing transformation of

ZRL and bridge the financing gaps. A resource mobilization strategy will be elaborated

upon once the resource estimates for implementing the strategic plan over the five years

has been worked out. In the resource mobilization strategy, development partners with

interest in the respective KRAs will be identified, and a framework for engaging them

elaborated. Financial management approaches that are consistent with good public

Strategic Pillars

Key Results Areas

MissionVision

Imp

lem

enta

tio

n P

lan


Strategies

Monthly Reports

Quarterly Reports

Annual Reports

Mid Term Reports

ZRL Board

Management Team


IDC

PACRA

56

financial management principles will be adopted. ZRL will enhance existing systems as

stated in the Financial KRA. Prudence will be exercised to ensure value for money.

Procurement will be guided by the public procurement laws, with a procurement plan

being prepared and adhered to on an annual basis. This requires that the procurement

section will have to undertake a user needs assessment exercise in time, create

awareness among the users on the importance of identifying user needs and

specifications in time and avoid delays in executing planned activities.

4.5 Investment Estimates for 2018 – 2022

Qty

Estimated

Cost (USD) Qty

Estimated

Cost (USD) Qty

Estimated

Cost (USD) Qty

Estimated

Cost (USD)

1 Rolling Stock Activities:

1.1 Purchase of Wagons 700 49,000,000 1,100 110,000,000 1,300 130,000,000 3,100 289,000,000

1.2 Purchase of New Locomotives 4 20,000,000 10 50,000,000 26 130,000,000 40 200,000,000

1.3 Periodical Overhaual of Existing 7 8,400,000 - - - - 7 8,400,000

1.4 Passenger Coaches - - 40 23,000,000 - - 40 23,000,000

1.5 Diesel Multi Units - - 4 32,000,000 - - 4 32,000,000

1.6 Subtotal Rolling Stock Activities 77,400,000 215,000,000 260,000,000 552,400,000

2 Workshop Equipment:

2.1 Wheel Re-Profiling Lathe 1 3,000,000 - - - - 1 3,000,000

2.2 Other Workshop Equipment - - - - 1 15,000,000 1 15,000,000

2.3 Subtotal Workshop Equipment 3,000,000 - 15,000,000 18,000,000

3 Rail Infrastructure Activities:

3.1 Concrete Sleepers 170,000 8,500,000 100,000 5,000,000 250,000 12,500,000 520,000 26,000,000

3.2 Ballast (Cubic Meters) 460,000m3 13,805,500 - - 140,000 4,200,000 600,000m3 18,005,500

3.3 91lb Rails (Km) 190Km 15,795,000 790Km 106,600,000 100Km 17,000,000 1,080 Km 139,395,000

3.5 Bridges and Station Buildings Various 2,300,000 - - Various 76,630,000 Various 78,930,000

3.6 Procurement of Inspection Trolleys - - 6 345,000 - - 6 345,000

3.7 Rail Track Support Equipment - - - - Various 12,000,000 Various 12,000,000

3.8 Rail Connectivity Various 10,000,000 Various 19,000,000 Various 27,000,000 56,000,000

3.9 Subtotal Infrastructure Activities 50,400,500 130,945,000 149,330,000 330,675,500

4 Signalling System & Others

4.1 Signalling/Telecoms System 1 10,000,000 - - - - 1 10,000,000

4.2 Working Capital 10,000,000 10,000,000

4.3 Implementation of PPP Projects 7 1,200,000 - - - - 7 1,200,000

4.4 Subtotal Signalling & Others 21,200,000 - 21,200,000

5 Grand Total 152,000,500 345,945,000 424,330,000 922,275,500

Grand Total

S/No. Particulars

Survival/Short Term (2018) Medium Term (2019-2020) Long Term (2021-2022)

Figure 4. 2 Investment Cost 2018 – 2022

For ZRL to achieve its goals and attain the projected profit levels, a sum of USD922

Million will have to be invested in the organisation. These funds will be sourced with

the help of the Government and other cooperating business partners, including through

Public Private Partnerships (PPP). In the 7NDP for instance, the Government has

indicated that it will commence the revitalisation of the 1,224-km Zambia Railways

Line, including the inter-mine line at a cost of US$1.3 billion during the plan period of

the 7NDP 2017-21.

57

CHAPTER 5

5 PERFORMANCE MONITORING

5.1 Introduction ZRL will undertake two levels of monitoring and evaluation. The first level is at the

ZRL itself and the performance of its activities. The strategic plan implementation

matrix contains performance indicators for purpose of performance monitoring.

Evidence based data will be collected in line with the key performance indicators on

regular basis. It is anticipated performance monitoring reports from various directorates

will be presented in line with the objectives of this strategic plan. Administrative and

support departments will also present their annual performance reports during the

review.

On regular basis i.e. monthly, quarterly, biannually and annually, performance reports

will require to be submitted to directly governance organs and stakeholders. The

Corporate planning department will check for monitoring the progress on activities

being undertaken.

The M&E team (corporate planning department) will develop manuals detailing the

procedures to be followed to ensure comprehensive data collection, analysis and

dissemination. The M&E manuals will show which data will be collected, how it will be

collected and captured, analysed, presentation and disseminated and how it will be

used to improve decision making within ZRL.

Target based performance appraisal will be introduced for both management and staff.

The targets will be drawn from the strategic plan and cascaded to various departments,

sections and units in an integrated and consistent and coherent manner. It is anticipated

that this will improve strategy implementation and success of ZRL as an institution.

A Monitoring and Evaluation framework will be developed and rolled out to enhance

the implementation of the plan.

58

5.2 Corporate Goals and Performance Metrics In today‘s fast-moving and technologically-driven world, seamless coordination

between the ZRL Directorates is critical. ZRL has set five corporate goals to drive

performance across the company. By striving for common goals, the priorities of each

Directorate will be better aligned and cooperation between teams will increase. The

goals align with the strategic elements.

A series of metrics and five-year performance targets for each goal has been established

to measure progress against a clear timeline. Performance plans for employees at all

levels of the company will be tied to these metrics — beginning with the Executive

Committee and cascading throughout the organization as appropriate.

This process helps ensure that all employees are contributing not only to their team or

Directorate, but also to the corporate goals.

Note: Metrics and performance targets may be adjusted or changed over time in

response to changing external factors and internal business needs.

ZRL has chosen metrics aligned with global best practice. However, these may be

changed or removed in response to business needs.

Additionally, ZRL is considering other metrics for future use once improvements have

been made to IT and data reporting systems. These improvements will allow the

company to more accurately capture key information and drill down to business line

and route levels. See Appendix 1 for definitions of metrics.

5.3 Factors That Could Affect Goal Achievement As captured in the performance matrix, ZRL has set future performance targets that are

realistic, timely and achievable. However, there are many external factors outside of

ZRL‘s control that may have a negative impact on future performance and prevent the

company from reaching its goals.

59

1. Capital Investment

ZRL — and its ability to carry out this strategic plan — depends upon continuing

support from Government along with significant investments from the private

sector in the form of potential loans and strategic partnership. While ZRL has

continues to reduce its debt burden in the past five years, the company‘s credit

standing could be worsened as a result of the financial conditions and actions of

Government support.

ZRL will continue to depend upon adequate annual levels of capital investment

to maintain its infrastructure, systems, rolling stock and stations in a ―state of

good repair‖ for both safety and operational efficiency. Adequate investments

are also necessary to support improvement of ZRL‘s cost to income ratio.

Significant cuts and fluctuations in investments will impede ZRL‘s ability to

reach its performance targets. Additionally, the timing of Government support

remains a challenge to ZRL‘s ability to execute planned improvements.

Appropriate investments are also necessary to improve open up new green field

projects and generate additional net revenues needed to pay for future long-

distance and corridor rolling stock. Significant cuts and fluctuations in

investments will impede ZRL‘s ability to reach its performance targets.

2. Operating Assistance

It has been the policy of Government to have an intercity, interconnected rail

system that takes advantage of Zambia‘s central location and its being land

linked. The safe and reliable operation of a national network that provides basic

surface mobility to citizens is up to now completely dependent upon adequate

annual government appropriations over the long-term. Failure by government to

support the operation of this system with the needed level of appropriations will

lead to some services, such as passenger services being considered for

elimination.

60

3. Economic Conditions

The economic turnaround in the region in the last couple of years presents an

opportunity for ZRL to expand its operation and to be the most reliable regional

logistic company. There has also been an increased interest in strategic partners

willing to invest in the ZRL operations. It is important that in choosing a strategic

partner ZRL and IDC work closely together to negotiate a deal that will be of

economic benefit to the country as a whole.

4. Statutory Requirements

The implementation of statutory and legal mandates requires money, time and

attention from management. ZRL in this strategy has adopted a zero tolerance to

regulatory breaches approach. It will endeavour to be 100% compliant with all

regulatory requirements.

5. Natural and Human-Caused Disasters

ZRL‘s performance can be seriously disrupted by natural and human-caused

disasters. Land encroachments, Wildfires, floods, mudslides and acts of

vandalism all have the potential to damage the infrastructure needed to operate

trains. Future disasters may negatively impact performance.

6. Energy Costs

Large portions of the company‘s operating costs are driven by prices for diesel

fuel and electricity. Spikes in energy costs can greatly affect ZRL‘s ability to fund

other programs and projects that are necessary to achieve its goals.

7. Internal Factors

ZRL must assess several key internal factors to ensure it is capable of reaching its

performance targets. These factors include risk assessment, organizational

structure, business processes, human capital management and information

technology. The company must ensure these factors align with its strategic needs

and long-term vision.

61

CHAPTER 6

6 THE RAILWAY SUB-SECTOR: TRENDS AND EMERGING ISSUES

6.1 Introduction The railway sector plays the role of an economic engine in the development of

countries. The Growth of economies correlates positively with the growth of the

railways. India, China, Brazil and European countries, etc have achieved economic

growth through railway investments. The subsector sector allows nations to take

advantage of economies of scale.

In other words, the railway sector is very much linked and influences developments in

other sectors of the economy. Indeed, it affects attainment of all eight Sustainable

Development Goals (SDGs).

However, when compared to the road subsector, the freight and passenger market

share by rail is in the range of 10% to 15% on the African continent today.

6.2 International Developments Most African countries face huge costs associated with transportation. In accessing

foreign markets, on average, Africa‘s transport and insurance costs represent 30% of the

total value of exports, which compares unfavourably with 8.6% in developed countries.

Although most countries in African share the problem of high transport costs,

landlocked countries face the most excessive transport costs (in the range of 50% to 60%

of the total value of goods and services) the continent.

Transit times on African transport corridors are unduly long due to factors such as

unclear and sometimes conflicting rules and regulations, inefficient service providers,

road blocks, as well as cumbersome administrative and customs procedures. These

have created a serious challenge to transport facilitation and trade on the continent. It

leads to excessive traffic delays, resulting in substantial increase in transport costs.

62

Road traffic accidents kill 1.2 million people in the world per year. Out of this number,

over 40%, are on African roads. Moreover, Africa has the highest number of road traffic

accidents per capita.

Today, the continent has a total railway network of over 95,000 km or 3.1 km of per

1,000km2, most of which is disjointed. With the exception of North Africa, railways in

Africa generally have a low level of traffic mainly due to poor railway infrastructure.

When compared to the road subsector, the freight and passenger market share by rail is

in the range of 10% to 15%.

In recent years, African governments have allocated 6-8 per cent of their GDP annually

to infrastructure development including the transformation of the railway subsector. In

Zambia for instance, the Government has indicated that it will commence the

revitalisation of the 1,224-km Zambia Railways Line, including the inter-mine lines at a

cost of US$1.3 billion in the 7NDP covering the period 2017-21.

6.3 Actions taken and progress made in Zambia The GRZ is taking a number of concrete actions and made some progress towards

implementation of railway transport-related commitments and goals contained in the

7NDP, the NTMP and the NTP. Some of the measures identified and/or being taken are

highlighted below:

1. Full rehabilitation and upgrade of the railway infrastructure and the

development of an integrated cargo and passenger rail (the transformation of the

railway sub sector into an efficient, reliable, safe, and competitive transport mode

with appropriate interfaces with the other modes of transport).

2. The development of the following Greenfield railway projects so as to link

Zambia to almost all the trade corridors in the sub-region.

Chipata- Serenje via Petauke involving 389km

Kafue- Lions Den via Chirundu involving 306km

63

Nseluka-Mpulungu via Mbala (191km)

Livingstone-Katima Mulilo via Kazungula (200km)

Chingola-Jimbe via Solwezi (600km)

3. The review of legislative framework in the railway sub-sector in Zambia (review

of the Railways Act of Zambia).

4. The separation of railway operations from railway infrastructure development

and maintenance (the establishment of a railway authority and introduction of a

rail regulator).

5. Future plans to build railway lines to standard gauge.

6.4 Passenger and Freight Traffic Trends in Zambia The Annual GDP Growth Rate in Zambia is expected to be 3.80% by the end of 2017,

according to Trading Economics global macro models and analysts‘ expectations. In the

long-term, the Zambia GDP Annual Growth Rate is projected to trend around 5.00% in

2020, according to the econometric models.

Arising from the increased economic activity, Zambia is undergoing a trend of

urbanization which is quickly increasing urban populations. The result of urbanization

in terms of transportation is increased travel demand. According to the Central

Statistical Office (CSO), the population of Zambia is projected to increase to nearly 40

million people in 2035 out of which 40% shall be in urban areas especially along the line

of rail.

In terms of freight, traffic in Zambia is mainly composed of imports, exports and transit

traffic between Zambia and the rest of the countries in the sub-region. The other type of

traffic is local or domestic traffic within Zambia.

The projected production of copper in Zambia and south of the Democratic Republic of

Congo (DRC) is projected to increase from the current 1.2 million tons per annum to 2.3

million in 2020 and 3 million in 2025. Similarly the demand for imported mining inputs

64

such as sulphur, chemicals and industrial machinery is expected to increase. Other

imports projected to increase include fuels, fertilisers, daily supplies, product oil, etc.

With the projected increase in economic activities, the movement of other export

commodities such as cobalt, manganese, agricultural products, timber, etc, is

anticipated to heighten as well. Likewise, the movement of domestic commodities vis-à-

vis sugar, cement, agricultural products, coal, etc, is also expected to continue

increasing.

Railway transport has a great advantage in the transportation of the above highlighted

various industry and mining commodities mainly because of its technical and economic

features.

6.5 Monitoring and Assessment of the Trends and Emerging Issues A Technical Committee will be constituted to look at the future of the railway subsector

in Zambia. The committee will monitor and assess the global trends of the sub-sector.

With that appraisal they will narrow it down to the sub- region and eventually ZRL.

65

7 ANNEXES

66

7.1 Annex 1: PROJECTED YEAR ON YEAR KEY RESULTS FOR THE PLAN PERIOD Strategic Objective KPI Unit of

Measure Base Line 2016

KPI Targets Over the Plan Period (Year on Year)

S/No. S/No. 2018 2019 2020 2021 2022

1 Improve traffic to 4 million tons per annum by 2022.

1 Tonnes of cargo moved Million tons 0.6 1.2 1.9 2.8 3.6 4.0

2 Average distance covered per ton Km 345 400 410 410 415 420

3 Freight revenue/annum Million USD 14 32 58 84 109 123

4 Average Earning/Ton USD 24 27 30 30 30 31

4 International to Local Traffic Ratio 1/1 3/2 3/2 3/2 3/2 3/2

2 To increase the freight market share from 8% to 30% by 2022

5 Freight market share 8% 10% 16% 21% 28% 30%

3 To increase the passenger market share from 12% to 25% by 2022

6 No. of long distance passengers (long distance) moved per year No. 243,000

198,848 223,081 239,926 262,228 350,810

7 Passenger market share 12% 12% 15% 16% 18% 25%

8 Passenger revenue/annum

Million ZMW 12 9 19 23 24 28

4 To improve the of the rail track to accommodate speeds of 80-100km/h for freight and passenger trains respectively by 2022.

9 Freight Trains Km/h 20 20 30 50 70 80

10 Passenger Km/h 30 30 40 60 80 100

11 Percentage of track on TSR % 5% 5% 4% 2% 1% 1%

5 Acquire new 3,100 wagons, 40 locomotives and 40 passenger coaches by 2022

12 No. of available new locos No. -

4

14

24 30

40

13 No. of available new wagons No. -

1,100 1,700

2,200 2,800

3,100

14 No. of available new coaches No. -

- 20 40 40 40

6 To improve reliability and availability through enhanced maintenance

15 Locomotive reliability Km/Failure 2,542

7,000 10,000 10,000 10,000

10,000

16 Locomotive Availability % 80% 80% 80% 80% 80% 80%

17 Wagon Availability % 80% 80% 80% 80% 80% 80%

7 Increase gross revenue generation to USD128 million in 2022

18 Annual revenue generated Million USD 17 34 61 87 113 128

To have overall operational costs within 90% of total revenue

19 O&M to Revenue Ratio % 107% 75% 75% 75% 75% 75%

20 G&A to Revenue Ratio % 18% 15% 15% 15% 15% 15%

8 Improve train operations efficiency 21

Average transit time for freight trains (LRS-NDR) Hours 72 72 60 40 30 20

22 Average transit time for passenger trains (LRS-NKA) Hours 58 58 36 24 18 12

23 Fuel consumption index L/NTKM 0.0165 0.014 0.014 0.014 0.014 0.014

9 Employee productivity 24 Tonnage/Employee-Year)

Ton/Emp-Yr) 624

1,200 1,500

1,800 2,200

2,300

25 Revenue/Employee-Year USD/Emp-Yr) 17,400

34,000 48,158 55,929 69,056

73,600

67

7.2 Annex 2: Organization Chart

68

7.3 Annex 3: Comprehensive Profit and Loss Statement Item Total Grand Total 2018 2019 2020 2021 2022

Transport Statistics:

Tonnage 13,500,000 1,200,000 1,900,000 2,800,000 3,600,000 4,000,000

Ton-Km 5,581,000,000 480,000,000 779,000,000 1,148,000,000 1,494,000,000 1,680,000,000

Average Distance 413 400 410 410 415 420

$- Ton $30 $27 $30 $30 $30 $31

Cent-Ton-Km 7 7 7 7 7 7

Tonnage Break-Even Point 14,338,290 1,511,361 1,883,499 3,099,670 3,941,918 3,934,899

Particulars: Total -US$ Total - ZMW 2018-US$ 2018-ZMW 2019-US$ 2019-ZMW 2020-US$ 2020-ZMW 2021-US$ 2021-ZMW 2022-US$ 2022-ZMW

Revenue:

Freight Revenue $405,000,000 4,050,000,000 $32,000,000 320,000,000 $57,000,000 570,000,000 $84,000,000 840,000,000 $109,000,000 1,090,000,000 $123,000,000 1,230,000,000

Passenger Train Revenue $10,315,000 103,150,000 $900,000 9,000,000 $1,900,000 19,000,000 $2,300,000 23,000,000 $2,415,000 24,150,000 $2,800,000 28,000,000

Real Estate Revenue $7,025,940 70,259,400 $810,000 8,100,000 $972,000 9,720,000 $1,263,600 12,636,000 $1,895,400 18,954,000 $2,084,940 20,849,400

Interest Receivable $40,713,000 407,130,000 $3,393,000 33,930,000 $840,000 8,400,000 $14,640,000 146,400,000 $20,220,000 202,200,000 $1,620,000 16,200,000

Other Income $237,304 2,373,042 $45,600 456,000 $46,512 465,120 $47,442 474,422 $48,391 483,911 $49,359 493,589

Total Revenue $463,291,244 4,632,912,442 $37,148,600 371,486,000 $60,758,512 607,585,120 $102,251,042 1,022,510,422 $133,578,791 1,335,787,911 $129,554,299 1,295,542,989

Expenditure:

Man Power Costs $143,816,691 1,438,166,913 $15,973,898 159,738,980 $18,227,554 182,275,536 $30,675,313 306,753,127 $40,073,637 400,736,373 $38,866,290 388,662,897

Fuel and Lubricants $92,658,249 926,582,488 $7,429,720 74,297,200 $12,151,702 121,517,024 $20,450,208 204,502,084 $26,715,758 267,157,582 $25,910,860 259,108,598

Repairs and Maintenance $88,025,336 880,253,364 $7,058,234 70,582,340 $11,544,117 115,441,173 $19,427,698 194,276,980 $25,379,970 253,799,703 $24,615,317 246,153,168

Administration $46,329,124 463,291,244 $3,714,860 37,148,600 $6,075,851 60,758,512 $10,225,104 102,251,042 $13,357,879 133,578,791 $12,955,430 129,554,299

Operating Expenses $23,164,562 231,645,622 $1,857,430 18,574,300 $3,037,926 30,379,256 $5,112,552 51,125,521 $6,678,940 66,789,396 $6,477,715 64,777,149

Total Expenditure $393,993,963 3,939,939,632 $36,034,142 360,341,420 $51,037,150 510,371,501 $85,890,875 858,908,755 $112,206,185 1,122,061,845 $108,825,611 1,088,256,111

Operating profit [EBITDA] $69,297,281 692,972,811 $1,114,458 11,144,580 $9,721,362 97,213,619 $16,360,167 163,601,668 $21,372,607 213,726,066 $20,728,688 207,286,878

Depreciation, Provision for Retirement and Finance Charges

Depreciation $23,218,706 232,187,065 $2,431,127 24,311,275 $3,185,130 31,851,300 $4,391,534 43,915,340 $4,160,852 41,608,525 $9,050,062 90,500,625

Provision for retirement $10,800,000 108,000,000 $1,500,000 15,000,000 $1,900,000 19,000,000 $2,300,000 23,000,000 $2,500,000 25,000,000 $2,600,000 26,000,000

Finance Expenses & Exchange Loss $2,136,040 20,990,400 $337,700 3,377,000 $382,700 3,827,000 $407,700 4,077,000 $485,470 4,854,700 $522,470 4,854,700

Total $36,154,746 361,177,465 $4,268,827 42,688,275 $5,467,830 54,678,300 $7,099,234 70,992,340 $7,146,322 71,463,225 $12,172,532 121,355,325

Profit Before Tax $33,142,535 331,795,346 ($3,154,369) (31,543,695) $4,253,532 42,535,319 $9,260,933 92,609,328 $14,226,284 142,262,841 $8,556,155 85,931,553

Provision for tax $12,703,916 127,039,164 0 0 1,488,736 14,887,362 3,241,326 32,413,265 4,979,199 49,791,994 2,994,654 29,946,544

Profit After Tax $20,438,618 204,756,182 ($3,154,369) (31,543,695) $2,764,796 27,647,957 $6,019,606 60,196,063 $9,247,085 92,470,846 $5,561,501 55,985,010

69

7.4 Annex 4: Cash Flow Statement

Item 2018-US$ 2018-ZMW 2019-US$ 2019-ZMW 2020-US$ 2020-ZMW 2021-US$ 2021-ZMW 2022-US$ 2022-ZMW

Opening Cash Balance ($500,000) (5,000,000) $101,256,571 1,012,565,714 $8,700,966 87,009,658 $260,966,268 2,609,662,680 $367,032,246 3,670,322,465

Inflows

Collections from Previous Year's Debtors $0 0 $6,400,000 64,000,000 $11,400,000 114,000,000 $16,800,000 168,000,000 $21,800,000 218,000,000

Freight Revenue $32,000,000 320,000,000 $57,000,000 570,000,000 $84,000,000 840,000,000 $109,000,000 1,090,000,000 $123,000,000 1,230,000,000

Total $32,000,000 320,000,000 $63,400,000 634,000,000 $95,400,000 954,000,000 $125,800,000 1,258,000,000 $144,800,000 1,448,000,000

Less: Freight Revenue Uncollected ($6,400,000) (64,000,000) ($11,400,000) (114,000,000) ($16,800,000) (168,000,000) ($21,800,000) (218,000,000) ($24,600,000) (246,000,000)

Freight Revenue Inflow $25,600,000 256,000,000 $52,000,000 520,000,000 $78,600,000 786,000,000 $104,000,000 1,040,000,000 $120,200,000 1,202,000,000

Collections from Previous Year's Debtors $0 0 $1,287,150 12,871,500 $939,628 9,396,280 $4,562,761 45,627,606 $6,144,698 61,446,978

Estates $810,000 8,100,000 $972,000 9,720,000 $1,263,600 12,636,000 $1,895,400 18,954,000 $2,084,940 20,849,400

Passenger Train Revenue $900,000 9,000,000 $1,900,000 19,000,000 $2,300,000 23,000,000 $2,415,000 24,150,000 $2,800,000 28,000,000

Interest Receivable $3,393,000 33,930,000 $840,000 8,400,000 $14,640,000 146,400,000 $20,220,000 202,200,000 $1,620,000 16,200,000

Other Income (way leaves) $45,600 456,000 $46,512 465,120 $47,442 474,422 $48,391 483,911 $49,359 493,589

Total Other Income $5,148,600 51,486,000 $5,045,662 50,456,620 $19,190,670 191,906,702 $29,141,552 291,415,516 $12,698,997 126,989,967

Less: Estates Rev. Uncollected ($1,287,150) (12,871,500) ($939,628) (9,396,280) ($4,562,761) (45,627,606) ($6,144,698) (61,446,978) ($1,638,575) (16,385,747)

Inflows - From Other Rev. Streams $3,861,450 38,614,500 $4,106,034 41,060,340 $14,627,910 146,279,097 $22,996,854 229,968,539 $11,060,422 110,604,220

Total Inflow $29,461,450 294,614,500 $56,106,034 561,060,340 $93,227,910 932,279,097 $126,996,854 1,269,968,539 $131,260,422 1,312,604,220

Loan amount $152,000,500 1,520,005,000 $0 0 $345,945,000 3,459,450,000 $424,330,000 4,243,300,000 $0 0

Grand Total $181,461,950 1,814,619,500 $56,106,034 561,060,340 $439,172,910 4,391,729,097 $551,326,854 5,513,268,539 $131,260,422 1,312,604,220

Outflows

Previous Year's Creditors Payments $8,500,000 85,000,000 $4,012,049 40,120,488 $6,561,919 65,619,193 $11,043,113 110,431,126 $14,426,509 144,265,094

Man Power Costs $15,973,898 159,738,980 $18,227,554 182,275,536 $30,675,313 306,753,127 $40,073,637 400,736,373 $38,866,290 388,662,897

Fuel and Lubricants $7,429,720 74,297,200 $12,151,702 121,517,024 $20,450,208 204,502,084 $26,715,758 267,157,582 $25,910,860 259,108,598

Repairs and Maintenance $7,058,234 70,582,340 $11,544,117 115,441,173 $19,427,698 194,276,980 $25,379,970 253,799,703 $24,615,317 246,153,168

Administration $3,714,860 37,148,600 $6,075,851 60,758,512 $10,225,104 102,251,042 $13,357,879 133,578,791 $12,955,430 129,554,299

Operating Expenses $1,857,430 18,574,300 $3,037,926 30,379,256 $5,112,552 51,125,521 $6,678,940 66,789,396 $6,477,715 64,777,149

Cost of feasibility studies $1,200,000 12,000,000 $0 0 $0 0 $0 0 $0 0

Acquisition of New Rolling Stock & Loco Remanufacture$14,500,000 145,000,000 $37,700,000 377,000,000 $58,550,000 585,500,000 $199,157,500 1,991,575,000 $182,319,500 1,823,195,000

Rail Infrastructure rehabilitation & new connectivity $20,700,125 207,001,250 $53,820,325 538,203,250 $42,016,300 420,163,000 $131,789,250 1,317,892,500 $128,089,500 1,280,895,000

Procurement of new Signalling & Telecoms $2,500,000 25,000,000 $6,500,000 65,000,000 $1,000,000 10,000,000 $0 0 0

Less payable following year ($4,012,049) (40,120,488) ($6,561,919) (65,619,193) ($11,043,113) (110,431,126) ($14,426,509) (144,265,094) ($13,991,864) (139,918,643)

Total Outflows $79,422,218 794,222,182 $146,507,605 1,465,076,046 $182,975,982 1,829,759,822 $439,769,538 4,397,695,376 $419,669,256 4,196,692,562

Cash Available Before Finace Exp. $102,039,732 1,020,397,318 ($90,401,571) (904,015,706) $256,196,927 2,561,969,275 $111,557,316 1,115,573,162 ($288,408,834) (2,884,088,343)

Loan Repayments

Interest expenses $0 0 $0 0 $0 0 $0 0 $5,080,936 50,809,360

Principal Amounts $0 0 $0 0 $0 0 $0 0 $15,200,050 152,000,500

Total Loan + Interest Payments $0 0 $0 0 $0 0 $0 0 $20,280,986 202,809,860

Cash Available Before Bank Charges $102,039,732 1,020,397,318 ($90,401,571) (904,015,706) $256,196,927 2,561,969,275 $111,557,316 1,115,573,162 ($308,689,820) (3,086,898,203)

.

Other Payments

Bank Charges $60,000 600,000 $95,000 950,000 $120,000 1,200,000 $165,000 1,650,000 $202,000 2,020,000

Finance lease $223,160 2,231,604 $570,299 5,702,988 $570,299 5,702,988 $347,138 3,471,384 $360,032 3,600,321

Income Tax $0 0 $1,488,736 14,887,362 $3,241,326 32,413,265 $4,979,199 49,791,994 $2,994,654 29,946,544

Total - Other payments $283,160 2,831,604 $2,154,035 21,540,350 $3,931,625 39,316,253 $5,491,338 54,913,378 $3,556,686 35,566,865

Cash Available from yearly Operating Activities $101,756,571 1,017,565,714 ($92,555,606) (925,556,056) $252,265,302 2,522,653,022 $106,065,978 1,060,659,784 ($312,246,507) (3,122,465,068)

Closing Cash Balance $101,256,571 1,012,565,714 $8,700,966 87,009,658 $260,966,268 2,609,662,680 $367,032,246 3,670,322,465 $54,785,740 547,857,397

Note: Interest and Principal payable for the loans starts in year 5 on the USD152 million short term investment needs

70

7.5 Annex 4: Statement of Financial Position ASSETS 2018 2019 2020 2021 2022

Non-currents assets

Property, plant and equipment 441,750,857 1,767,104,057 2,588,051,217 5,855,910,192 8,523,554,567

Capital Work-in-progress 61,013,475 61,013,475 61,013,475 61,013,475 61,013,475

Investments 4,687,500 4,687,500 4,687,500 4,687,500 4,687,500

507,451,832 1,832,805,032 2,653,752,192 5,921,611,167 8,589,255,542

Currents assets

Trade receivables and Other receivables 677,258,492 242,142,176 380,999,524 262,970,334 519,076,647

Inventories 116,162,143 185,134,645 229,794,136 366,377,908 638,033,886

Cash and cash equivalents 1,012,565,714 87,009,658 2,609,662,680 3,670,322,465 547,857,397

1,805,986,349 514,286,479 3,220,456,340 4,299,670,706 1,704,967,930

Total assets 2,313,438,180 2,347,091,511 5,874,208,532 10,221,281,873 10,294,223,472

EQUITY AND LIABILITIES

Capital and reserves

Share capital 197,756 197,756 197,756 197,756 197,756

Amounts received pending allotment of shares 627,228,974 627,228,974 627,228,974 627,228,974 627,228,974

Reserves (186,210,467) (158,562,510) (98,366,447) (5,895,600) 50,089,409

441,216,262 468,864,220 529,060,283 621,531,129 677,516,139

Loan 1,520,005,000 1,520,005,000 4,979,455,000 9,222,755,000 9,222,755,000

Non-current liabilities 1,520,005,000 1,520,005,000 4,979,455,000 9,222,755,000 9,222,755,000

Current liabilities

Trade and other payables (appendix) 195,374,019 214,911,421 236,402,563 260,042,820 286,047,102

Accruals and provisions (appendix) 132,766,898 116,834,870 102,814,686 90,476,924 81,429,231

Taxation payable 26,476,000 26,476,000 26,476,000 26,476,000 26,476,000

354,616,918 358,222,292 365,693,249 376,995,743 393,952,333

TOTAL EQUITY AND LIABILITIES 2,315,838,180 2,347,091,511 5,874,208,532 10,221,281,873 10,294,223,472

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