Botswana Railways (BR) is in the process of liquidating an investment held by local fund manager, African Alliance, to raise funds to cover the rail’s insurance reserve.
BusinessWeek recently reported on the Auditor General’s findings that BR’s assets of about P4.4 billion were uninsured thus leaving the parastatal at high risk.
Responding to written enquiries this week, officials at the rail parastatal said funds in the insurance reserve were diverted towards the costs of reintroducing the passenger train some years ago. “BR’s insurance reserves were used to cover the shortfall in funds to purchase passenger trains with the hope that it would make some returns,” officials said in an emailed response.
“However, the passenger train has been struggling after it lost some of its clients to road transport.
“However, Botswana Railways has an investment with African Alliance (and) is in the process of liquidating this amount to put it in the reserve to cover the assets, ” said officials.
Responding to the Auditor General, BR management said they once floated a tender for the insurance of assets, but received too high quotations.
Officials at the national rail carrier told BusinessWeek that a service provider was being engaged to do a feasibility study to establish which assets could be insured and which to be covered by the reserve.
“Note that the assets that are eligible for insurance are the rolling stock, buildings, signaling equipment and plant as well as the equipment which amount to P0.97 billion instead to the P4.4 billion referred to (by the Auditor General),” the officials said.
Management is reportedly considering other options of insuring its assets such as opening a general insurance reserve for self-insurance.
BR posted a P26.4 million loss for the year ended March 31, due largely to a loss of traffic on the lines, set against rising costs particularly around fuel, spares, maintenance and consumables.
“Our profits have been fluctuating because they are dependent on freight business especially transportation of fuel, soda ash and salt,” BR CEO, Leonard Makwinja told journalists on Wednesday.
“However, we are working on recapturing the fuel business and we are hopeful that the new coal mines will provide some growth in tonnage.
“We will also inject more wagons for carrying soda ash from Botash.”