China has made a $319m loan available to Zimbabwe for the expansion of the Kariba South hydropower station in an effort to ease erratic power supplies that have plagued the country, and spiked after a general election swept President Robert Mugabe to a seventh term in office.
China already enjoys a strong foothold in various sectors of the Zimbabwean economy, including diamond mining, construction and retail sales.
The loan provided by the China Export and Import Bank is seen by economic observers as an extension of its grip on Zimbabwe’s ailing economy.
Finance Minister Patrick Chinamasa said at the signing of the loan agreement: “This should go a long way in reducing power outages that characterise our power generation. For us the energy deficit has hamstrung the growth of our economy.
“Under this arrangement the bank will provide funding amounting to $319.5m, representing 90% of the total project cost, while government, through the Zimbabwe Power Company, will finance the 10% balance amounting to $35.4m.”
The terms of the loan include an annual interest rate of 2% and a repayment period of 20 years. The four-year project will result in the installation of two power units of 150MW each.
China’s Sinohydro won the bid for the project, of which the total cost is about $355m. At peak output, it will result in production at Kariba of 750MW.
China Exim Bank vice-president Zhu Hongjie said the bank had full confidence in Sinohydro’s ability to restore the Kariba South hydropower station and help ease the country’s power crisis. Eric Bloch, a senior partner at H&E Bloch consultancy, said the terms of the deal in principle were good and would be welcomed more by industry than ordinary persons.
“It’s at a low interest rate and over a long period of time. The reality is that Zimbabwe needs any financial assistance that it can get its hands on,” said Mr Bloch.
“Even if there are other terms of the deal that we are not privy to, China has ensured through facilitation of this deal that it remains in good standing with the government,” he said.
Zimbabwe Power Company MD Noah Gwariro said the loan provided the basic funding needed to ensure the first key steps towards the production of a reliable power supply were in place.
“What will be left is for us to raise the balance of about $35m. Work should start in the first quarter of next year with the contractor mobilising on site and doing a detailed design for the project. We expect the first unit to be ready by 2018,” said Mr Gwariro.
From : B D live
By Ray Ndlovu
13 November 2013