Economy

Major Chinese insurers ditch Zim projects

By Andrew Kunambura/Tinashe Kairiza

Chinese ambassador to Zimbabwe Mr Guo Shaochun with Zimbabwean Minister of Foreign Affairs and International Trade, Dr S.B Moyo.

Major Chinese insurance firms are refusing to underwrite critical infrastructure projects in Zimbabwe due to government’s failure to pay commitment fees and other related costs, it has emerged.

Official sources say the construction of the US$680 million Kunzvi Dam, for which the tender was awarded to Chinese state enterprise Sinohydro, has stalled after government dithered on paying the required US$10 million commitment fee, prompting one of China’s top insurance firms Sinosure — which has to date funded projects worth billions of dollars in Zimbabwe — to ditch the venture.

The construction of Kunzvi Dam, a highly profitable undertaking on completion, has remained in the pipeline since it was mulled in the 1950s when Zimbabwe was then called Southern Rhodesia and was part of a federation with Malawi and Zambia.

The dam has long been billed as the panacea to Harare’s perennial water woes and could spur a massive agricultural boom as the site is located in one of the country’s most fertile districts, Goromonzi.

Currently, Harare relies on the heavily polluted and silted Lake Manyame, whose water costs about US$40 million annually to clean.

Although Treasury allocated ZW$258 million (US$3 million) towards the project, sources said it is yet to get the necessary fiscal vote.

Government sources told the Zimbabwe Independent this week that as at present, the process of tying the loose ends of the tender has been put on hold because of the Chinese frustration at the lack of commitment by President Emmerson Mnangagwa’s administration.

“There has really been no progress on the project mainly because of government’s lack of commitment. What happens with projects of that nature is that they are underwritten by Chinese insurance companies and as of now, we have not paid the required commitment fee amounting to US$10 million and this has greatly frustrated the Chinese,” an official involved in the processes said.

“So, as we speak, Sinosure is holding on to its money, while Sinohydro is willing to resume work,” the official added.

Another government source said: “In the case of Kunzvi Dam, the tender was awarded to Sinohydro but work has not started because government has not yet paid the initial commitment fees and has failed to honour insurance premiums for previous project.”

Among a myriad of factors stalling some of the projects, the sources added, financiers in China were delaying to release funding because of government’s failure to service its ballooning debt with Sinosure, among other creditors.

“What I understand is that government owes a substantial debt to Sinosure which Zimbabwe has not been servicing. This has resulted in the delayed disbursements of funds earmarked for a number of projects,” a Chinese diplomat accredited to Harare said, emphasising that progress had also been slowed by challenges arising from the Covid-19 pandemic.

Chinese deputy ambassador to Zimbabwe Zhao Baogang, however, said he was not in a position to comment on the matter when he was asked about the matter.

“I do not have information about that. I am not in a possession to comment,” he said.

Apart from the Kunzvi Dam project, other ongoing projects which are in danger of being derailed include the US$1,1 billion expansion of the Hwange Thermal Power plant and the construction of the 2 400 megawatt, US$5 billion Batoka hydroelectric power station, for which a feasibility study is already underway.

Both projects, which are of immense economic benefit to the southern African nation, are being undertaken by Sinohydro.

The construction of Hwange units 7 and 8 is now 52% complete.

Another affected project is the expansion of the Robert Gabriel Mugabe International Airport by Jiangsu International Group of China at a cost of US$153 million. Last year, the Independent exclusively reported that the project was temporarily halted after government raided US$10 million held in an escrow account meant to fund the programme.

At the time the funds were raided, discussions between government officials, particularly from Treasury and China’s embassy officials were held to ensure that Zimbabwe would restore the money to allow work to progress. It is not yet clear whether Treasury complied.

The company also undertook the renovation of the Victoria Falls International Airport at a cost of US$150 million which saw the facility’s carrying capacity being significantly increased.

Sinohydro also undertook the US$533 million Kariba South expansion project to increase generation capacity by 300megawats.

Government and its related departments, the sources said, were also struggling to craft viable and bankable project proposals, which could attract Chinese banks and insurance firms to inject capital into local projects.

As the Chinese insurance firms turn their attention away from Zimbabwe as a profitable investment destination, their interest has shifted to other countries on the continent.

A very senior government source said: “A number of viable projects that Chinese state firms had committed to insure and finance risk being abandoned due to government’s failure to pay a range of costs required before work could start. What is clear is that delays on completion of the projects will arise.”

Minister of State for Presidential Affairs in charge of monitoring and implementation of government projects, Joram Gumbo, declined to comment.

“I cannot comment on those issues. You will have to talk to the Finance ministry which is responsible for allocation of funds. My duty is only to monitor the projects and report to the president,” he said.

Both Finance minister Mthuli Ncube and the ministry’s permanent secretary George Guvamatanga were not available for comment as they were not answering their mobile phones.

Concerns are growing that Zimbabwe is failing to fully utilise the US$60 billion which Chinese President Xi Jinping pledged to finance infrastructure projects in Africa in the form of assistance, investment and loans under the Belt and Road Initiative (BRI) at the Forum on China-Africa Cooperation (Focac) meeting in Beijing in September last 2018. – The Zimbabwe Independent.

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