Finance and Economic Development Minister, Patrick Chinamasa
THE cash-strapped government has revealed that it turned down funding from an undisclosed potential investor for the dualisation of the 900 kilometre Beitbridge-Harare-Chirundu highway after the investor demanded concessions prejudicial to the country.
On paper for several years, the mega project is currently estimated to be requiring about US$2,2 billion.
The investor had taken advantage of funding problems in the country by making several demands, forcing government to call off the deal last year, Finance and Economic Development Minister, Patrick Chinamasa disclosed.
The funder wanted to bring equipment from its country of origin, as well as all critical staff to complete the project.
The Beitbridge-Harare-Chirundu highway is one of southern Africa’s busiest roads, but it has not been rehabilitated for many years.
“Last year, we were offered money for the Chirundu-Harare-Beitbridge project but the contractor was insisting on 100 percent involvement of companies from its country of origin in the entire supply chain and we said keep your money,” Chinamasa told a Buy Zimbabwe conference on Thursday last week.
“Local procurement has limitations because most of our infrastructure projects are funded by foreign banks. They insist that goods must be sourced from their countries,” noted the Minister.
Development finance institutions, such as the Export Import Bank of India and China Eximbank and the Development Bank of Southern Africa (DBSA) of South Africa have recently been active in Zimbabwe, taking advantage of a “Look East Policy” adopted by government in 2004, as well as a general switch towards trade with the BRICS.
The minister did not disclose the identity of the funder, or the quantum of the funding pledged.
Foreign companies are significantly involved in the US$553 million Kariba South Hydroelectric Power Station upgrade, as well as thermal power station expansion projects being funded by Indians and Chinese institutions.
Chinamasa revealed that there was significant arm-twisting and demands in many of the big projects, which have mostly been funded by financial institutions from a bloc known as the BRICS (Brazil, Russia, India, China and South Africa).
He said he had to “bend over backwards” to accommodate manipulation in power projects, but would not accept this on other projects.
The Zimbabwe Building Contractors Association (ZBCA) has accused government of relaxing conditions for foreign companies in tender processes while tightening screws on local firms.
“The country is under siege from foreign contractors who bring labour, their own equipment and everything, with very little gains for the country,” said Obert Sibanda, ZBCA president.
“A number of contracts come with conditions that favour foreigners,” he added.
Chinamasa has said local firms could not qualify for tenders “unless you have a tax clearance certificate from the Zimbabwe Revenue Authority. You must pay rates, NSSA (and others). If directors are corrupt, they corrupt procurement officials. Local companies are encouraged to formalise their operations in order to benefit from public sector procurement,” said Chinamasa.
Sibanda later responded: “All these requirements do not apply to foreign companies.”
Two weeks ago, the Financial Gazette’s Companies & Markets reported that the cost of dualising the highway had increased to US$2,2 billion, US$200 million higher than its original budget.
But the new project cost was again more than double the US$883 million that ZimHighways, a local consortium of construction firms that had originally won the tender for the highway project, had quoted 13 years ago.
The additional US$200 million is almost equivalent to what it cost Infralink, a joint venture special purpose vehicle between the Zimbabwe National Road Administration and Group Five International, to upgrade the 800 kilometre Plumtree-Bulawayo-Harare-Mutare highway just two years ago.
The Infralink project was financed through a US$206 million loan from the Development Bank of South Africa.
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