BR plans more malls as ‘core business’ struggles
Botswana Railways (BR) is planning to build more malls through its subsidiary, JTTM Properties, as its railway business continues to underperform, suffering a P58 million loss last year, BusinessWeek has learnt. BR CEO, Leonard Makwinja told Parliament’s Public Accounts Committee this week that the parastatal’s subsidiaries such as JTTM and BR Properties were helping BR’s finances at a time when the railway business was struggling. JTTM owns Rail Park Mall and BR is looking for opportunities to develop more malls. Makwinja was responding to legislators’ criticisms that the BR appeared to be moving away from its core business and focusing on non-railway subsidiaries. “In 2019, we had a P58 million loss on the railway line, but overall we actually had a loss of P18 million because of the dividends from the other businesses,” he said. “It’s a situation where your core business is not making money and the subsidiaries help you.
“Companies like JTTM, which runs Rail Park are big and that’s why we are planning to build other malls.
“Our core business is to run railways and move goods, but the Botswana Railways Act changed in 2004 to allow us to join joint ventures and get into other business.
“Other railway companies around the world do the same and this is to augment the losses that railways make. “Our core business is not collapsing, but it would have suffered more if we did not have those other businesses.” Besides BR Properties and JTTM, other BR subsidiaries include Sea Rail in Namibia and Gabcon, a container terminal based in Gaborone. Sea Rail, based in Walvis Bay, operates the dry port designed to give Botswana access to the sea. “Sea Rail is growing and the time we will recognise its importance is when we connect the railway line to Walvis Bay,” Makwinja said.
The CEO told parliamentarians that BR’s losses stem from high costs of maintenance due to old rail infrastructure and antiquated rolling stock, as well as the fact that the railway line has restricted exits, which expose BR to the
risk of disruption. “About 80% of our revenue is freight from moving goods into South Africa and we lost a lot of traffic in 2018 and 2019 because Transnet was upgrading that line from Mafikeng to Krugersdorp. “After that, the coronavirus (COVID-19) also hit,” Makwinja said. He said the passenger rail service would remain suspended as it was making losses.
“It burns the same fuel whether it is full or not and it would only get full-on month-ends or holidays. “During the week, it would have few passengers, but we would still run from Lobatse to Francistown. “We have the numbers showing the cost of running from Lobatse to Francistown and the money we were making and I can tell you it does not make money. “It’s not only in this country, but even in South Africa, the passenger train is not making money. “Only places like China with millions of passengers can make money, but not here. “These passenger trains are only used to help government move people, but as a business, it does not make money, especially where ticket prices are regulated,” Makwinja said. He said BR was looking to procure trains that run at cheaper costs in order to reintroduce the passenger service. The service could be reintroduced for weekends and special occasions only. “There are decisions the government can make looking at decongesting roads and moving people. “That’s not a business decision, but the service can be run with a subsidy,” Makwinja said.