The Zimbabwe National Roads Administration (Zinara) is struggling to repay the loan acquired from the Development Bank of South Africa (DBSA) to upgrade the Plumtree-Bulawayo-Mutare Highway due to prevailing foreign currency shortages.
This has resulted in a series of defaults, which will see the country paying much more.
This also comes at a time when the national road administrator has appointed an advisor to assess this contract entered into under Public Private Partnerships to evaluate the impact.
Zimbabwe awarded Group Five, a South African firm to rehabilitate the 882 kilometre highway, which began in 2012 and funded to the tune of US$206 million.
The scope of works on the rehabilitation of the highway, which started during the inclusive Government era between Zanu-PF and two MDC formations, involved 50 percent resealing, 29 percent shoulder widening and surfacing (7m to 10m), 21 percent reconstruction in some sections and 9 percent state-of-the-art toll gates installation.
The Plumtree-Bulawayo-Mutare Highway upgrade is probably one of the huge road investments undertaken by the Government since independence nearly 40 years ago.
Under the deal, the money for loan repayment should come from toll gate fees collections. But the prevailing foreign currency shortages has seen Zinara struggling to repay. It is a 10-year loan, which should be fully repaid in the next two years, but due to a series of defaults, Zimbabwe will need more years to settle the debt.
More so, the country is left to pay huge penalties arising from failure to timely settle its obligations. The adoption of mono-currency has also made the situation even more complicated as Zinara now needs more local dollars to buy the US dollars.
The deal was entered during the multi-currency regime dominated by the US dollar.
Critics, however, say this might not be peculiar to Zinara as some State-owned entities, which borrowed money from foreign financiers to fund their projects may also be struggling to settle their debts in light of forex shortages.
For instance, Zesa received a US$533 million from China to expand its Kariba hydroelectric plant but has been facing forex challenges even to import power to narrow the supply gap.
Zinara chairman Michael Madanha told our sister paper The Sunday Mail Business that the only source of foreign currency are transit fees, not sufficient to meet its monthly obligations.
As such, the national road administrator was looking at re-negotiating repayment terms.
“The assessment of the deal is still being undertaken by the transactional advisor contracted by Zinara and it is coming at a time when the sourcing of foreign currency to pay the DBSA loan has become difficult given foreign currency challenges in the economy,” Mr Madanha said in an interview.
“Loan repayment is currently coming from the transit fees, which is the only source of foreign currency.”
Asked whether the arrangement was yielding impressive dividends for the country, Madanha said:
“The assessment on whether the PPP is yielding dividends to the country is what the new Zinara board and new management team are seized with. Zinara has engaged the transactional advisor to assess all contracts that gave rise to the PPP and evaluate whether it has achieved the intended purpose that was there at the inception of the contract.”
Efforts to get a comment from DBSA proved fruitless.