Road projects stall over cash

THE joint venture between the Zimbabwe National Road Administration (Zinara) and a South African company Group Five Limited to rehabilitate the Plumtree-Bulawayo-Harare-Mutare highway has plunged into funding problems as it emerged the Development Bank of Southern Africa (DBSA), which extended a US$206,6 million loan for the project, has withheld funding since May this year, after Zinara failed to meet its part of the bargain.

Report by Owen Gagare

Zinara and Group Five formed a 70-30% joint venture company, Infralink, to oversee the rehabilitation of the road network, before successfully applying for a loan from DBSA in 2010. Infralink then contracted Group Five to rehabilitate the roads.

Part of the conditions for the loan was, however, that Infralink, where Zinara is the majority shareholder, would fund a debt service reserve account (DSRA) with two quarterly loan installments during a two-year capital grace period. Thereafter all surplus cash generated by Infralink was supposed to be directed to a maintenance reserve account which would be used to fund periodic as well as major maintenance interventions.

Sources close to the project, however, said Infralink failed to honour the pledge resulting in DBSA withholding funding dealing a blow to rehabilitation work which had resulted in a big improvement of the highway.

Infralink was meant to service the loan through “transport-related revenues as well as project-specific tolling revenues at its disposal”. These included toll fees, fuel levy, overload fees, transit fees and abnormal load fees.

As a result of the funding freeze, the road rehabilitation programme has virtually ground to a halt, because Group Five has failed to access funds to pay its suppliers as well as the companies it sub-contracted to work on some sections of the road.

Suppliers owed by Group Five include Comoil, Boc Gases, Telford Mica and DX Centre, among others. Some of these companies have stopped supplying Group Five in protest over late payment.

Sources said Group Five has also been forced to retrench about 400 workers while those still contracted are idle.

One of Group Five’s suppliers said his company had not been paid for some time despite numerous promises by project director Johannes Livdick Coetzee.

The supplier, however, said Group Five was not to blame for the problems as they were caused by a misunderstanding between Infralink and DBSA.

On August 15, Coetzee wrote to the company’s suppliers and sub-contractors informing them that delays in accessing funds, which started in May, were persisting.

“Unfortunately, this situation has recurred and the expected additional (monthly) funding drawdowns have not been forthcoming as anticipated,” reads the letter.

“As a result, it is unlikely that Group Five will be able to fund the payment commitments for the end of August 2013, and the latest forecast is that funding drawdowns will only be received during the course of September.”

No funds were, however, released in September and on October 22, he wrote again saying funds would be available in November.

“It is with regret that we find ourselves having to advise you at this late stage that the project funding shall only be available in the first half of November 2013,” wrote Coetzee.

“The prolonged funding resolution process has now been completed and requires ratification on 28th October 2013, too late for the necessary back-to-back payments to be made, in the first instance to Group Five, and then subsequently to all our suppliers and sub contactors.

“We understand the undue financial burden this payment delay has placed on you, and together with our clients, wish to express our sincere appreciation of your continued support during this difficult time.”

Group Five’s commercial manager Paul Quinn confirmed the funding problems, but said Zinara would be best placed to comment on why DBSA was not releasing the funds.
“Yes, we have been having funding problems for about five or six months now. As a result, we have been gradually scaling down until we got to a halt. There is no work going on other than on sections of the road which are a danger to the public if left unattended. For that (reason) we have had to get emergency funding from somewhere,” said Quinn.

Zinara spokesperson Augustine Moyo refused to comment and referred questions to the permanent secretary in the Ministry of Transport and Infrastructural Development, Munesu Munodawafa. Munodawafa said he was attending a strategic planning workshop and could not comment on the issue.

The project spans a total 801,5 kilometres and each kilometre was estimated to cost US$257 800.