News / National
Zinara secures US$207m
28 Nov 2010 at 05:09hrs | Views
ZIMBABWE National Road Administration
(Zinara) has sourced a US$207 million loan facility from the Development
Bank of Southern Africa (DBSA) for the rehabilitation and construction
of the Plumtree-Mutare highway.
The transaction, which is now awaiting the green light from South Africa's Export Credit Insurance Corporation before the funds can be released for the multi-million-dollar project, will be administered through a special purpose vehicle, InfraLink, between Zinara and South African construction giant Group 5.
South Africa's Export Credit Insurance Corporation facilitates and encourages export trade by underwriting export credit loans and investments outside South Africa, in order to enable South African contractors to win capital goods and services' contracts in other countries.
Most importantly, the corporation insures against both sovereign and credit risk.
A senior Government official, who requested anonymity, confirmed the deal but indicated that the matter was still being kept under wraps.
However, an official from the Export Credit Insurance Corporation of South Africa confirmed that the deal is expected to be completed before the end of this year.
"We are currently working on facilities on Zimbabwean entities such as Agribank and Zinara. In particular, the Zinara facility, which involves a loan facility of US$207 million, doesn't present a sovereign risk because a special purpose vehicle has been formed that will ring fence the toll fees and ensure that the loan is repaid.
"Furthermore, the bank that will be lending the money will take care of the credit risk," explained the official.
The official also noted that an estimated US$1 billion was, however, needed for works on the highway from Beitbridge to Chirundu but indicated that the Government has to engage other development banks and partners to finance the project.
The rehabilitation and construction of the highway from Plumtree to Bulawayo and ultimately to Harare and Mutare will also see the construction of 10 toll gates which will be manned by Group 5 as a measure to ring fence the payment of the loan for a period of 10 years under a Build-Operate-Transfer (BOT) scheme.
BOT is a project financing and operating approach that has found an application in recent years primarily in the area of capital-intensive infrastructure privatisation in the developing countries with high risk credit environment.
Presently toll gates in the country are manned by the Zimbabwe Revenue Authority (Zimra) and this has, however, not translated into any improvements on the state of the country's roads.
The Sunday Mail Business has gathered that part of the work that will be conducted on the targeted highways includes resurfacing and reconstruction of some segments of the roads where necessary.
It is believed that the involvement of Group 5 into the project will likely lead to the importation of expertise in administration of tolling points and also the establishment of state-of-the-art tolling facilities.
Group 5, which is the largest construction and manufacturing company in Southern Africa with an annual turnover of R9 billion, has unmatched expertise in the development of toll motorway projects, investment in toll road concessions; operations and maintenance of toll roads, toll and motorway management equipment procurement and installation; the development and operation of electronic toll collection; and road user charging projects.
The company was largely involved in the construction of the R3,1 billion, 56 000-seater Moses Mabhida Stadium in Durban which was host to the 2010 FIFA World Cup.
The deal has been structured in such a way that there is no Government involvement with regards to Zinara, which is a parastatal, and allows for a private enterprise between Zinara's SPV-InfraLink and Group 5.
Information gathered by this paper indicates that the tie-up between Zinara and the South African firm is unique since the country doesn't yet have a Public Private Sector Partnership (PPP) model.
Government is agreed that PPPs are integral to the development and rehabilitation of the country's infrastructure, including long-term economic development.
Companies and public entities are increasingly structuring financing models to facilitate access to capital at the same time eliminating concerns pertaining to sovereign risk.
Market watchers note that the country doesn't have the wherewithal to support the extensive public works that are needed on the country's highways.
Furthermore, access to lines of credit and development finance, especially from the Bretton Woods institutions, has been difficult in the wake of a combination of high indebtedness of the country and economic sanctions.
Zimbabwe has 18 338km of State roads, 5 290km of urban roads and 54 240km of rural roads and this translates to a total 77 868km of Zimbabwe's road network which needs maintenance.
Depending on what needs to be done on a road, to reconstruct a kilometre costs up to US$400 000, to do an asphalt overlay costs up to US$170 000 per kilometre and to do just a reseal costs up to US$50 000 per kilometre. Therefore, to rehabilitate the Harare-Beitbridge road, for example, or to dualise it would require over US$224 million.
However, this total network has by now increased significantly because of new developed residential areas and farm resettlements.
Experts note that Zimbabwe's road network is a very old one and it should be appreciated that maintaining an old asset is expensive.
Some of the country's roads were built over 40 years ago and this means that almost the whole road network now requires rehabilitation and not only the routine maintenance of pothole patching which is presently being done now.
Early this year, the DBSA agreed to extend a US$1,3 billion loan for the Beitbridge-Harare-Chirundu dual carriageway.
The DBSA and Government signed a disbursement agreement of US$500 000 to fund feasibility studies ahead of the actual construction of the road.
It is understood that the dualisation of the Beitbridge-Harare-Chirundu highway will be carried out under at 30-year BOT arrangement.
The transaction, which is now awaiting the green light from South Africa's Export Credit Insurance Corporation before the funds can be released for the multi-million-dollar project, will be administered through a special purpose vehicle, InfraLink, between Zinara and South African construction giant Group 5.
South Africa's Export Credit Insurance Corporation facilitates and encourages export trade by underwriting export credit loans and investments outside South Africa, in order to enable South African contractors to win capital goods and services' contracts in other countries.
Most importantly, the corporation insures against both sovereign and credit risk.
A senior Government official, who requested anonymity, confirmed the deal but indicated that the matter was still being kept under wraps.
However, an official from the Export Credit Insurance Corporation of South Africa confirmed that the deal is expected to be completed before the end of this year.
"We are currently working on facilities on Zimbabwean entities such as Agribank and Zinara. In particular, the Zinara facility, which involves a loan facility of US$207 million, doesn't present a sovereign risk because a special purpose vehicle has been formed that will ring fence the toll fees and ensure that the loan is repaid.
"Furthermore, the bank that will be lending the money will take care of the credit risk," explained the official.
The official also noted that an estimated US$1 billion was, however, needed for works on the highway from Beitbridge to Chirundu but indicated that the Government has to engage other development banks and partners to finance the project.
The rehabilitation and construction of the highway from Plumtree to Bulawayo and ultimately to Harare and Mutare will also see the construction of 10 toll gates which will be manned by Group 5 as a measure to ring fence the payment of the loan for a period of 10 years under a Build-Operate-Transfer (BOT) scheme.
BOT is a project financing and operating approach that has found an application in recent years primarily in the area of capital-intensive infrastructure privatisation in the developing countries with high risk credit environment.
Presently toll gates in the country are manned by the Zimbabwe Revenue Authority (Zimra) and this has, however, not translated into any improvements on the state of the country's roads.
The Sunday Mail Business has gathered that part of the work that will be conducted on the targeted highways includes resurfacing and reconstruction of some segments of the roads where necessary.
It is believed that the involvement of Group 5 into the project will likely lead to the importation of expertise in administration of tolling points and also the establishment of state-of-the-art tolling facilities.
Group 5, which is the largest construction and manufacturing company in Southern Africa with an annual turnover of R9 billion, has unmatched expertise in the development of toll motorway projects, investment in toll road concessions; operations and maintenance of toll roads, toll and motorway management equipment procurement and installation; the development and operation of electronic toll collection; and road user charging projects.
The company was largely involved in the construction of the R3,1 billion, 56 000-seater Moses Mabhida Stadium in Durban which was host to the 2010 FIFA World Cup.
The deal has been structured in such a way that there is no Government involvement with regards to Zinara, which is a parastatal, and allows for a private enterprise between Zinara's SPV-InfraLink and Group 5.
Information gathered by this paper indicates that the tie-up between Zinara and the South African firm is unique since the country doesn't yet have a Public Private Sector Partnership (PPP) model.
Government is agreed that PPPs are integral to the development and rehabilitation of the country's infrastructure, including long-term economic development.
Companies and public entities are increasingly structuring financing models to facilitate access to capital at the same time eliminating concerns pertaining to sovereign risk.
Market watchers note that the country doesn't have the wherewithal to support the extensive public works that are needed on the country's highways.
Furthermore, access to lines of credit and development finance, especially from the Bretton Woods institutions, has been difficult in the wake of a combination of high indebtedness of the country and economic sanctions.
Zimbabwe has 18 338km of State roads, 5 290km of urban roads and 54 240km of rural roads and this translates to a total 77 868km of Zimbabwe's road network which needs maintenance.
Depending on what needs to be done on a road, to reconstruct a kilometre costs up to US$400 000, to do an asphalt overlay costs up to US$170 000 per kilometre and to do just a reseal costs up to US$50 000 per kilometre. Therefore, to rehabilitate the Harare-Beitbridge road, for example, or to dualise it would require over US$224 million.
However, this total network has by now increased significantly because of new developed residential areas and farm resettlements.
Experts note that Zimbabwe's road network is a very old one and it should be appreciated that maintaining an old asset is expensive.
Some of the country's roads were built over 40 years ago and this means that almost the whole road network now requires rehabilitation and not only the routine maintenance of pothole patching which is presently being done now.
Early this year, the DBSA agreed to extend a US$1,3 billion loan for the Beitbridge-Harare-Chirundu dual carriageway.
The DBSA and Government signed a disbursement agreement of US$500 000 to fund feasibility studies ahead of the actual construction of the road.
It is understood that the dualisation of the Beitbridge-Harare-Chirundu highway will be carried out under at 30-year BOT arrangement.
Source - www.sundaymail.co.zw
