Source: Govt to float US$500m bond for Beitbridge-Chirundu Rd – The Zimbabwe Independent October 23, 2018
GOVERNMENT will float a US$500 million bond to raise capital for rehabilitation of the Beitbridge-Harare-Chirundu highway, while renegotiating a US$2,7 billion road-dualisation deal with Chinese contractor Anhui Foreign Economic Construction Group Limited (Afecc) as the project takes yet another twist, the Zimbabwe Independent can reveal.
By Nyasha Chingono
Afecc, the second highest bidder when the tender was floated in 2016, was awarded the contract after government in April this year terminated its earlier agreement with Austrian company Geiger International for the dualisation of the road.
Government and Afecc, however, reached a stalemate in September when the contractor raised concerns over the build, operate and transfer (BOT) arrangement preferred by government. Afecc was particularly worried about how it would recoup its investment and suggested that it does the 133km stretch from Harare to Chivhu instead.
A cabinet meeting held last week approved plans to float the US$500 million bond with President Emmerson Mnangagwa calling for expeditious implementation of the project.
Transport minister Joel Biggie Matiza confirmed the development in an interview with the Independent this week, saying government would float the bond to complement the US$150 million bond which has already been secured. The US$150 million bond is being administered by ZB Bank and Old Mutual.
The development, Matiza said, would expedite works on the highway following years of reciprocal head-butting between government and foreign contractors which forestalled progress.
He added that negotiations with Afecc would continue.
“We are looking to do that. It hasn’t gone much into detail but for now we have US$150 million that we can work with before the onset of the rainy season. As you can see already, the road is in a bad shape,” Matiza said.
“While we are negotiating with Afecc, we are starting rehabilitation of some sections of the road. Negotiations might take 10 to 12 months, but for now we have an urgent need to rehabilitate the road.”
The impasse over finer details of the deal had threatened to derail the agreement between government and Afecc, prompting Afecc president Jiang Zhaoyao to fly into the country from his base in Hefei city, the capital of Anhui province of China, to try and salvage the deal.
At the time, the government was considering awarding the tender to local companies.
The ongoing negotiations between government and Afecc are a culmination of Zhaoyao’s visit.
Matiza this week also confirmed that government would award tenders to local contractors in a bid to reduce the scope of work for the main contractor.
“We will engage local contractors while we negotiate for a bigger deal. When we conclude, the scope of the work would have been reduced,” said Matiza.
The Zimbabwe National Road Administration (Zinara) will be responsible for disbursing the funds to local contractors.
The Beitbridge-Harare-Chirundu highway facilitates the movement of millions of people between Southern Africa and Central, East and North Africa while facilitating regional trade.
The country has, however, failed to repair and upgrade its roads which date back to the Rhodesian era.
A 2001 Sadc assessment of the road infrastructure in the region showed that a third of Zimbabwe’s road network was in a parlous state. The Beitbridge-Chirundu highway was singled out as one of the roads that needed rehabilitation because of its importance in the region.
However, Zimbabwe has neither carried out any major rehabilitation of the road nor dualised the road despite many public announcements.
The tender to dualise the highway, which has been on the drawing board for the past 16 years, was initially awarded in 2002 to ZimHighways — a consortium of local companies — but the company failed to implement the project for over a decade.
When government cancelled the deal, the contractor sought recourse at the High Court before dropping the legal battle in 2013, paving way for the Geiger deal, which was finalised in 2016 after talks that dragged on for over four years.
According to documents seen by the Independent in 2013, the Development Bank of Southern Africa (DBSA), which funded the construction of the Plumtree-Bulawayo-Harare-Mutare highway, was willing to release about US$1,1 billion for the upgrading of the Beitbridge-Chirundu Road, given its strategic importance, but the Zimbabwean government was not willing to award the tender to Group Five.
A report compiled after DBSA’s Integrated Investment Proposals Corporate Credit committee meeting held on October 13 2010 shows that the bank felt Zimbabwe’s roads should be given priority as they would benefit the whole of Southern Africa.
“Given Zimbabwe’s strategic geographic positioning, the proposed roads rehabilitation programme provides for linkages with Sadc trade corridors, an initiative which addresses the DBSA’s regional integration objectives and provides for immense growth opportunities given that Zimbabwe has the ability to service the needs of over 400 million people in the region,” it says.
DBSA said key factors why a sound Zimbabwean road infrastructure was vital include that the landlocked country is strategically positioned as a gateway between Southern Africa and the rest of Africa.