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Govt delays bungle US$150m solar deal

by Staff reporter
02 Jul 2021 at 18:40hrs | Views
A US$150 million solar power plant deal is facing collapse after prolonged bureaucratic delays frustrated the investor, who top government officials say is now considering pulling out and suing for losses, it has emerged.

Top government officials told the Zimbabwe Independent this week that the deal was under threat due to dithering by the Zimbabwe Energy Regulatory Authority (Zera) to grant a licence to the investor, Boustead Solar (Boustead).

This has put under sharp scrutiny President Emmerson Mnangagwa's "Zimbabwe Is Open for Business" mantra.

The multi-million-dollar project, on the verge of suffering a stillbirth, is meant to generate 180 megawatts (MW) of power.

This comes at a time Zimbabwe is battling a fresh power crisis with prolonged load-shedding.

It also comes as the globe is moving to renewable sources of energy, of which solar is central, and shedding off polluting fossil energy sources and hydropower plants which are now unsustainable due to climate change-induced warmer conditions.

Although Zimbabwe entered a "new dispensation" following the military coup that ousted long-time ruler Robert Mugabe in 2017, the country is still struggling to un-
lock fresh investment capital.

With Mugabe's exit, after a near-four- decade rule marked by stagnating Foreign Direct Investment (FDI) and a deteriorating economic environment, Mnangagwa commenced his tenure pledging to roll out business friendly policies.

His government also promised to improve Zimbabwe's standing on the Ease of Doing Business Index.

Setting up a reliable energy infrastructure, coupled with uprooting hurdles associated with registering new businesses into the sector, have been identified as essential building blocks towards reviving the economy.

In the latest investment project, Zera has taken more than 18 months to process a licence for Boustead Solar, after the entity submitted its application last year in January.

Subsequently, sources told the Independent this week the investor is now on the verge of withdrawing the application while contemplating instituting legal action to recover US$200 000 paid in application fees.

Zera has issued 120 licences for various projects which are yet to be implemented.

The 120 licensed projects are generating in total less than 30MW.

"It is ridiculous that Boustead Solar has not been issued a licence by Zera for a US$150 million investment as they are still considering its application despite issuing 120 licences, which are yet to yield 30MW in Zimbabwe. Each time the investor makes inquiries, he is told the application is still being processed," an official source said this week.

"Boustead Solar has instructed its lawyers to withdraw their application and demand a refund of US$200 000 paid in application costs," the source said.

Under terms of the project, set to be rolled out in phases, an initial 32MW was to be installed in Bulawayo at a cost of over US$830 000 per MW.

Boustead Solar representatives could not be reached for comment at the time of going to print.

Zera chief executive Edington Mazambani told the Independent this week that Boustead's application was under consideration.

"The application is going through an assessment and a due diligence process. An update pertaining to this project was duly communicated to the project owners," Mazambani said.

He said if all required conditions are satisfied, a licence is normally issued within six months.

Mazambani said: "According to the Electricity Act (Chap 13:19), a power generation licence may be issued within six months subject to the applicant having submitted all the licensing requirements.

"However, Zera pledges, through its Stakeholder Service Charter, to issue the power generation licence within 90 days if all the relevant documents are submitted on time. In respect of the application, the project promoter was responded to accordingly."

A cursory look at Zimbabwe's investment climate in 2017 when Mnangagwa took over shows that the country has struggled to attract FDI, amid calls by multilateral lenders and the West for government to roll out sweeping economic reforms seen as key towards setting the country's battered economy on a firm recovery and growth trajectory.

As part of efforts to lure investment, the government has also established the Zimbabwe Investment and Development Authority (Zida), whose other core function involves addressing bottlenecks impeding investment.

Mnangagwa has also been studying the Rwandan economic model, which has earned global acclaim, in a bid to attract foreign investors. Rwanda is one of the continent's fastest growing economies whose friendly investor policies have been applauded globally.

FDI in 2017 stood at US$250 million, sharply rising to US$740 million in 2018 before plunging to US$280 million in 2019.

Boustead Solar is a subsidiary of Boustead Beef, the company which entered an agreement with the government to inject US$600 million towards reviving defunct Cold Storage Company (CSC) in 2018.

With the world moving towards embracing environmentally friendly energy sources, implementing the solar project would be integral for the beef processing concern to penetrate lucrative markets which are particular about carbon emissions.

"Our problem is to sell the beef in lucrative markets. We have to be sustainable and carbon neutral. Controlling carbon emissions is all part of the process of raising investment which we have to go through," an industry expert said.

"We have been worried about this issue for the past 22 weeks when Boustead paid Zera. Zesa has already done the grid impact assessment. The same applies for processing the Environmental Impact Assessment (EIA). Now Zera is delaying everything," the source added.

Sources said Zera was now asking for a water extraction permit and soil samples from Boustead, requirements which do not apply to setting up a solar power plant.

This is not the first time huge investment deal has been scuppered by bureaucratic red tape.

In 2015 Aliko Dangote, Africa's wealthiest man, was dissuaded from investing in Zimbabwe after a former minister solicited for a US$5 million bribe.

Dangote was on a visit to scout for business opportunities in Zimbabwe in 2015 during which trip he expressed commitment to set up a cement manufacturing plant in the country.

Rampant corruption, policy inconsistencies and bureaucratic red tape, among other factors have been identified as scuttling capital in Zimbabwe.

Though the government introduced the Victoria Falls Stock Exchange (VFX), which exclusively trades in foreign currency, investors have shied away from the bourse.

Only one counter namely Seed Co International Limited is trading on the bourse. Market watchers have opined that implementing far reaching economic and political reforms would inject life into Zimbabwe's economy.

The much-hyped US$400 million National Railways of Zimbabwe (NRZ) revival deal by the Diaspora Infrastructure Development Group (DIDG) was terminated after a lengthy and convoluted process. The consortium has since instructed lawyers to slap NRZ with a US$215 million lawsuit following termination of the deal to recoup costs and related losses.

DIDG, mostly constituted by Zimbabwean entrepreneurs, are now setting up a US$350 million titanium dioxide plant in neighbouring South Africa through their Nyanza Light Metals investment vehicle. Once complete, the plant will be the first of its kind in Africa.

In 2015, the government also terminated the US$750 million Ziscosteel revival deal by Indian conglomerate Essar Holdings. Five years on, the government is yet to identify a suitable investment partner to inject fresh investment capital into the moribund state enterprise.

Source - newsday
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