China Eximbank provides $140.8 million buyer’s credit loan for Rehabilitation of Municipal Water and Sewage Treatment Works Project (linked to #63444)

On 21 March, 2011, the Government of Zimbabwe and China Eximbank signed a $141.3 million buyer’s credit loan (BCL) agreement for Rehabilitation of Municipal Water and Sewage Treatment Works Project. Zimbabwean Vice President Joice Mujuru signed the loan agreement in Harare (See: 8_AUGUST_2012_VOL._21_NO._46). This loan agreement comes as a result of a 2010 Memorandum of Understanding (MOU) signed by the Chinese Government and Government of Zimbabwe for the financing of various development projects. Officials from Zimbabwe’s Ministry of Finance, representatives from China Eximbank and Sinosure signed the agreement. Sinosure agreed to provide insurance cover for loans issued by China Eximbank (See: Zimbabwean Capital Secures Loan Facility to Upgrade Water and Sewerage System ). This loan carried the following terms: 11 year maturity, 4 year grace period, an interest rate of 3.507% (calculated by adding the 6-month LIBOR rate from March 2011, .507, plus a 3% margin: 0.507 + 3 = 3.507%), a 0.375% management fee, and a 0.375% commitment fee (See: Zimbabwe 2011 ARTICLE IV CONSULTATION). However, according to the 2019 Blue Book Estimates of Revenue and Expenditure published by Zimbabwe’s Ministry of Finance and Economic Development, the BCL face value was subsequently revised to $140,825,714.38 (See: 2019_Blue_Book_Combined (1)). This project is also known as the Harare City Water Reticulation Project. The Chinese project title is 哈拉雷市政供水改造项目 or 津巴布韦水厂项目 or 的哈拉雷莫尔顿杰夫瑞自来水厂维修工程 or 的哈拉雷城市供水及污水处理系统改造项目. The purpose of this project was to support the development and rehabilitation of water works and sewers in the Zimbabwe’s capital, Harare. More specifically, the proceeds of the loan were to be used to rehabilitate, replace, install and commission equipment at the Morton Jaffray water treatment plant, the Prince Edward Water Treatment plant, the Crowborough sewage plant, the Firle sewage plant, and pump stations at Warren Control, Alex Park, and Letombo. Some of the loan proceeds were also earmarked for information technology and automated billing activities, the acquisition of water treatment chemicals, the installation of laboratory, the installation of pressure-reducing valves, and the installation of prepaid meters in 500,000 households.China National Machinery and Equipment Corporation (CNMEC) was the contractor responsible for implementation of the project (See: CMEC津巴布韦哈拉雷城市供水及污水处理系统改造项目生效). This project officially entered into force on 26 January, 2013, but it was plagued by various delays and controversies. In 2013, China Eximbank reportedly withheld loan disbursements due to the Government of Zimbabwe’s failure to meet its outstanding obligation under a 1997 loan that it provided to Zimbabwe Iron and Steel Industries (See Project ID#17125) (See: Zisco Gets Debt Relief).In September 2013, 19 Chinese engineers joined a larger 46 engineer team to work on the project. In June 2014, the deadline for project completion was pushed forward from April 2016 to June 2015. As of June 2014, several areas previously not receiving water had access and obsolete equipment was removed from facilities, the Morton Jaffray water treatment plant was operating at 70 percent capacity, and two pressure-reducing valves were installed at Warren Park D and Ardbennie. A month later, in July 2014, an investigation was launched after the Harare City Council was accused of spending $8 million of the loan proceeds to purchase 25 luxury vehicles (See: Council hears committee findings on water loan abuse). Harare City Council insisted that the vehicles were for service deliveries; however, China Eximbank decided to withhold loan disbursements after learning that the loan proceeds were not being used for the intended purposes (See: Council hears committee findings on water loan abuse and REPORT of the Auditor–General on the MANAGEMENT OF SEWERAGE SYSTEM BY URBAN LOCAL AUTHORITIES UNDER THE MINISTRY OF LOCAL GOVERNMENT, PUBLIC WORKS AND NATIONAL HOUSING).As of June 2017, only half of the China Eximbank loan ($72 million) had been disbursed. As of February 2020, China Eximbank was still withholding loan disbursements for this project.This project was financed as part of a larger $566 million USD umbrella agreement, which is captured in linked project #63444.

Additional details

At the time that the 2011 loan agreement for the Rehabilitation of Municipal Water and Sewage Treatment Works Project was presented to Zimbabwe’s Parliament for ratification, the maturity length of the loan was identified as 9 years, which implies that 2020 was final maturity date under the original loan agreement. However, in the 2019 Blue Book Estimates of Revenue and Expenditure published by Zimbabwe’s Ministry of Finance and Economic Development, the final maturity date of the loan is identified as 2022, which implies an 11 year maturity. The IMF also reports that this loan has an 11 year maturity.

Number of official sources

14

Number of unofficial sources

19