Published: October 13, 2011
A US$206mn loan from the DBSA will rehabilitate a major toll road in Zimbabwe
The Development Bank of Southern Africa (DBSA) has lent US$206mn to a road rehabilitation project in Zimbabwe.
The road stretches 801KM and spans from the country’s western border with Botswana, through Harare, to its eastern border with Mozambique. The project will improve trade flows between Zimbabwe and its neighbours, reduce road maintenance costs, cut journey times and prevent accidents.
The loan, which is the second largest to be granted by the bank outside South Africa, is only the second it has approved in the country.
Admassu Tadesse, a DBSA group executive, says a lack of viable projects has constrained the bank's lending in the country until now. “We have never really found a project that was strong enough from a credit point of view and adequately structured to meet our appetite for risk.”
Playing it safe
The DBSA signed the loan agreement with the Zimbabwe National Roads Administration (ZINARA), the Ministry of Transport, Communications and Infrastructural Development and the Ministry of Finance in Zimbabwe.
But Tadesse maintains that the project will be free of government control. “We are not in the business of lending to central governments, we are in the business of lending to projects.”
He explains that ZINARA is a state-owned entity but it is ring-fenced from the state. “It has its own powers and its own funding. It is not a government department.”
To ensure no interference in the project a special purpose vehicle has been created to ring-fence its revenues.
The loan will be repaid from the road’s toll revenues. “We don’t expect the central government to service any kind of loan for which we are a lender,” Tadesse says. “We would look at the project to service the loan.”
The DBSA is currently assessing several other infrastructure projects in the country.