HARARE – Zesa Holdings (Zesa) has tentatively agreed to a $100 million financing deal with the African Export and Import Bank (Afreximbank) for its prepaid meter-expansion project, businessdaily can reveal.
This comes amid growing concern about prolonged power outages and the utility’s inability to raise enough cash to deal with the current energy deficit.
Gift Simwaka, Afreximbank’s regional manager for southern Africa, has tacitly confirmed the bank’s negotiations with Zesa, but would not be drawn on detail.
“The intention is to finalise the deal before year end,” he told this paper on Tuesday.
Earlier, Energy minister Dzikamai Mavhaire had indicated that he was not in a position to make an informed opinion or comment about the arrangement as the issue might still be at board level.
“… I have not heard anything. All I know is Zesa went to tender in June and I am yet to be briefed on any new developments,” he told businessdaily.
With the cash-strapped Zimbabwean electricity power utility embarking on an ambitious drive to install 600 000 prepaid meters to save power and resources, it has, however, struggled for cash to expand this key project.
To date, the parastatal has only managed about 293 000-plus installations for both domestic and industrial users countrywide.
And amid serious indications that the Afreximbank facility — initiated and wrapped up in three months — could kick in early next year, it is understood that the Cairo-based multilateral lender would provide the loan at eight percent-plus labour.
“As you would know, the bank has been supporting Zimbabwe for the past 10 years or so and this (funding agreement) is really a relief not only for Zesa, but the entire economy given the current liquidity conditions,” said a source familiar with the development.
“What’s also laudable about the continental lender’s loans and facilities is that they have always had a shorter turnaround time plus affordability unlike our Chinese friends who take up to one and half years to approve loans,” they said.
Besides taking longer to approve and release funds for projects, some Asian institutions pay only 85 percent of project costs and demand up to 15 percent in insurance cover — as was the case with numerous facilities advanced to many private and public sector companies locally.
In recent times, Afreximbank has supported several Zimbabwean and regional projects, including Econet Wireless’ $362 million fund-raiser for expansion projects, a $1,9 billion Kenya Airways recapitalisation initiative, $422 million syndicated facility for Tanzania’s Kilwa Energy and other projects in Ghana, and Nigeria.
In Egypt, the continental lender has also structured a $17 million deal for Energy Power and Telecoms Solutions for the installation, and expansion of a 400KV transmission line.
In Zimbabwe, many believe a scenario where people will pre-pay for what they consume will not only help in monitoring demand, but also help in managing supply issues such as imports and internal generation activities.
Smart meters, industry players say, will also give accurate readings and at a time consumers were regularly complaining about estimated bills.
While the power utility says it was owed $600 million-plus by consumers, nearly a third or $170 million has been slashed off Zesa’s debtor’s book after an uproar over the conventional billing method based on estimates.
But such a move — as well as the company’s poor debt management system — has had a knock on effect on its capacity to service local and foreign debts.
Meanwhile, the regional bank has expressed its willingness to continue helping Zimbabwe with financial packages to corporates and other entities since they were struggling to access cheaper, and long-term loans from banks.
“We are really committed to Zimbabwe as shown by our work in the past two years,” Simwaka said.