Chinese bank withhold funds for Zimbabwe electricity expansion project

The China Export and Import Bank has withheld funds for the Kariba South Hydro Power expansion until the government clears its previous loan obligations.

The decision is likely to delay completion of the mega electricity project expected to generate an additional 300 megawatts.

Zimbabwe, like its Sadc neighbours, is experiencing electricity deficits and expansion of Kariba South is billed to significantly improve the situation.

The deadline for completion of the Kariba South project is 2017.

Treasury is facing liquidity challenges due to illegal sanctions imposed by Western countries upset by the land reform programme that empowered the majority at the turn of the millennium.

There are efforts being made by the government to get treasury to disburse funds towards servicing of these loans and other capital projects.

China Export and Import Bank is bankrolling the expansion of Kariba South Power Station by a Chinese firm, Sinohydro.

It is understood Zimbabwe is in arrears on previous loans supposed to be serviced at the end of every March and September.

Sources at Sinohydro said while work had been progressing well, delays in disbursing funds by China Exim Bank were likely to hinder progress.

"The main challenge is the interim payment resulting from the delayed repayment to China Exim Bank for other previous projects by the Zimbabwe government," said a source.

"Due time for repayment is March 21. The bank said there would be no further disbursements for the present project until the due repayment was settled by the Zimbabwe government.

"The interim payment for Kariba South extension project has been delayed by more than one month. If there's still no payment disbursed, we'll face big challenges in cashflow on this project."

Zimbabwe Power Company managing director Noah Gwariro said questions on debt arrears should be referred to the Ministry of Finance and Economic Development.

"That aspect can be best answered by the Permanent Secretary in the Ministry of Finance because it wouldn't be proper to say the government has failed to pay," he said. "Otherwise work is going ahead. There's no hold up."

Finance and Economic Development Minister Patrick Chinamasa said he was yet to be briefed on the issue.

"I haven't yet been briefed on the matter," he said.

Despite the financial drawback, Sinohydro sources said they had made progress on the project.

There are 80 Chinese managers and engineers and 450 local employees working on the project.

"There are six construction adits, 60 percent of which has been completed," said a source at Sinohydro. "The underground powerhouse, the excavation of arch crown, which is the most difficult to be constructed in the first layer of the powerhouse, is scheduled to be completed at the end of April. That takes 12 percent of the total powerhouse excavation quantities.

"Water intake and water intake road, about 250,000 cubic metres, has been excavated, and it takes 72 percent of the total water intake excavation quantities. Both quarry and aggregates plant are under construction. A least 80 percent of the total quantities has been completed, with test expected to be finished and in use at the end of June.

"Both hydraulic turbine generator unit and overhead crane of the powerhouse are being manufactured in China."

The country's daily peak demand for power is about 2,500MW against 1,300MW generation capacity.