News / National
The Group Five deal will not dualise Zimbabwe roads
26 Jun 2011 at 00:39hrs | Views
Tthe signing of a deal between Zimbabwe and SA's Group Five for the rehabilitation of the Plumtree-Mutare highway has been viewed as the single largest infrastructural development project after the country's 10- year recession.
However, in recent weeks questions have been raised as to how the deal was consummated and how much equity Zimbabwe National Roads Agency (Zinara) holds in the joint venture company between itself and Group Five called Infralink.
The Sunday Mail Business Editor Augustine Moyo (AM) engages Zinara chief executive officer Mr Frank Chitukutuku (FC) on the matter.
AM: How did this Infralink project start?
FC: Zinara, after realising that our roads needed large sums of money for rehabilitation, we thought of getting a strategic partner in order to team up for purposes of sourcing funding. Since our neighbours (South Africa) had credible construction companies who would give us credibility, we identified Group Five as a suitable partner to be in a joint venture with. We, therefore, formed a company called Infralink.
AM: So who applied for funding in South Africa and how much was it? Is it Zinara or Group Five?
FC: It is Infralink that then applied for funding from the Development Bank of Southern Africa (DBSA). However, there are several conditions precedent that we are still working on in order to get drawdowns from the bank.
The application was for US$206,6 million, which the bank approved. Hence you saw the Honourable Minister of Transport, Communication and Infrastructure Development Mr Nicholas Goche and Honourable Minister of Finance Mr Tendai Biti giving their nod to this deal. We are excited that this has been the biggest amount of money extended to the country for infrastructure development in more than 15 years.
AM: Were there any tenders floated by Zinara which made Group Five the main contractor?
FC: No tenders were floated by Zinara.
AM: Why?
FC: The reason is because Group Five and Zinara went into a relationship to form a joint venture that resulted in the formation of Infralink. Infralink is the one that sourced the money, which it got. So it was an in-built agreement that if we get funding, Group Five will be the main contractor by virtue of being an Infralink shareholder.
However, all the other local companies would participate by way of being sub-contractors. We also needed to have the required credibility in the eyes of the financier, hence the selection of Group Five made it possible for us to get the money.
Therefore, if you are the one who has money how do you go for tender and compete with those who have no money?
AM: What is the shareholding structure of Infralink?
FC: Zinara holds 70 percent equity in Infralink and Group Five holds 30 percent. We would not have agreed to such an arrangement where we would not have control of Infralink. Further, there is a board of directors for Infralink, which is made up of executives from both Zinara and Group Five.
AM: Has Infralink already floated tenders for sub-contractors and the supply of materials?
FC: No. Actually, Infralink has advertised for the expression of interest.
AM: What do you mean by expression of interest?
FC: What this means is that companies who wish to participate in this project are required to submit their profiles so that they would be able to participate in a competitive bidding when the tenders are floated.
AM: What is the current scope of this project?
FC: This project involves the rehabilitation of the road from Plumtree to Bulawayo to Harare to Mutare, making a total of 820km, rehabilitation of some sections and also resealing, road marking and putting road furniture. It also includes putting up state-of-the-art toll plazas to replace the shelters that have been erected. The scope of this project is not to dualise the road, but just rehabilitate the existing road.
AM: Is it true that the ministry intends to get Infralink to do highway modernisation projects for all highways including the one awarded to Zimhighways?
FC: No, Infralink has been formed to do only the Plumtree-Harare-Mutare project, and not other projects. I am sure the ministry is working on how other highways are going to be funded. As for Infralink, it only exists for the project in question.
AM: What was the scope for the Zimhighways project?
FC: We understand that Zimhighways was contracted to dualise Beitbridge-Harare highway. However, that does not prevent the ministry from working on the existing road as it does not form part of Zimhighways dualisation project.
You may be aware that a lot of lives are being lost on that road due to its state. Therefore, if the ministry finds money from anywhere, I do not see the reason why they cannot work on the existing road since it is its mandate to maintain that road. If Zimhighways get funding, they can still dualise the road
AM: We hear that Zinara's partner Group Five are under probe from the Johannesburg Securities Exchange, what is your comment about that?
FC: Not to our knowledge. We do not have any negative report that we have heard about the probe. What we know is that they are one of the best performing listed companies in South Africa as shown in their published financial reports
However, in recent weeks questions have been raised as to how the deal was consummated and how much equity Zimbabwe National Roads Agency (Zinara) holds in the joint venture company between itself and Group Five called Infralink.
The Sunday Mail Business Editor Augustine Moyo (AM) engages Zinara chief executive officer Mr Frank Chitukutuku (FC) on the matter.
AM: How did this Infralink project start?
FC: Zinara, after realising that our roads needed large sums of money for rehabilitation, we thought of getting a strategic partner in order to team up for purposes of sourcing funding. Since our neighbours (South Africa) had credible construction companies who would give us credibility, we identified Group Five as a suitable partner to be in a joint venture with. We, therefore, formed a company called Infralink.
AM: So who applied for funding in South Africa and how much was it? Is it Zinara or Group Five?
FC: It is Infralink that then applied for funding from the Development Bank of Southern Africa (DBSA). However, there are several conditions precedent that we are still working on in order to get drawdowns from the bank.
The application was for US$206,6 million, which the bank approved. Hence you saw the Honourable Minister of Transport, Communication and Infrastructure Development Mr Nicholas Goche and Honourable Minister of Finance Mr Tendai Biti giving their nod to this deal. We are excited that this has been the biggest amount of money extended to the country for infrastructure development in more than 15 years.
AM: Were there any tenders floated by Zinara which made Group Five the main contractor?
FC: No tenders were floated by Zinara.
AM: Why?
FC: The reason is because Group Five and Zinara went into a relationship to form a joint venture that resulted in the formation of Infralink. Infralink is the one that sourced the money, which it got. So it was an in-built agreement that if we get funding, Group Five will be the main contractor by virtue of being an Infralink shareholder.
However, all the other local companies would participate by way of being sub-contractors. We also needed to have the required credibility in the eyes of the financier, hence the selection of Group Five made it possible for us to get the money.
Therefore, if you are the one who has money how do you go for tender and compete with those who have no money?
AM: What is the shareholding structure of Infralink?
FC: Zinara holds 70 percent equity in Infralink and Group Five holds 30 percent. We would not have agreed to such an arrangement where we would not have control of Infralink. Further, there is a board of directors for Infralink, which is made up of executives from both Zinara and Group Five.
AM: Has Infralink already floated tenders for sub-contractors and the supply of materials?
FC: No. Actually, Infralink has advertised for the expression of interest.
AM: What do you mean by expression of interest?
FC: What this means is that companies who wish to participate in this project are required to submit their profiles so that they would be able to participate in a competitive bidding when the tenders are floated.
AM: What is the current scope of this project?
FC: This project involves the rehabilitation of the road from Plumtree to Bulawayo to Harare to Mutare, making a total of 820km, rehabilitation of some sections and also resealing, road marking and putting road furniture. It also includes putting up state-of-the-art toll plazas to replace the shelters that have been erected. The scope of this project is not to dualise the road, but just rehabilitate the existing road.
AM: Is it true that the ministry intends to get Infralink to do highway modernisation projects for all highways including the one awarded to Zimhighways?
FC: No, Infralink has been formed to do only the Plumtree-Harare-Mutare project, and not other projects. I am sure the ministry is working on how other highways are going to be funded. As for Infralink, it only exists for the project in question.
AM: What was the scope for the Zimhighways project?
FC: We understand that Zimhighways was contracted to dualise Beitbridge-Harare highway. However, that does not prevent the ministry from working on the existing road as it does not form part of Zimhighways dualisation project.
You may be aware that a lot of lives are being lost on that road due to its state. Therefore, if the ministry finds money from anywhere, I do not see the reason why they cannot work on the existing road since it is its mandate to maintain that road. If Zimhighways get funding, they can still dualise the road
AM: We hear that Zinara's partner Group Five are under probe from the Johannesburg Securities Exchange, what is your comment about that?
FC: Not to our knowledge. We do not have any negative report that we have heard about the probe. What we know is that they are one of the best performing listed companies in South Africa as shown in their published financial reports
Source - Sunday Mail
