THE Zambezi River Authority (ZRA) is failing to access about US$90 million locked up at CBZ Bank (CBZ) due to government foreign exchange regulations introduced in 2019.
According to the ZRA 2021 annual report and financial statements presented to Parliament of Zimbabwe yesterday, the authority suffered a loss from impairment of its long-term investments with the CBZ, following the conversion of investments from the US dollars to Zimbabwean dollars.
The Zimbabwe and Zambia-owned company is facing severe liquidity challenges while there is over US$90 million locked up in Zimbabwe.
On risk management and control, the report noted that the authority might fail to collect what it is owed and this ranges from sales receipts to deposits and investments placed with financial institutions.
“The authority has suffered loss from impairment of it long-term investments with the Commercial Bank of Zimbabwe, following the conversion of investments from United States dollars to the Zimbabwe dollar,” it said.
The report further indicates that the debt owed by Zimbabwean and Zambian power utilities Zesa and Zesco, respectively, for water received during hydroelectricity generation at Lake Kariba had risen by 53% from 2020.
It also revealed that the liquidity challenges faced by ZRA led to the authority defaulting on its repayments on a US$114 million loan facility agreed on in 2015 with the Zambian government to finance the Kariba Dam Rehabilitation Project (KDRP).
The authority now owes the Zambian government approximately US$20 million in arrears.
However, in a budget performance overview, ZRA board chairperson Francesca Chisangano-Zyambo said the authority achieved an operating income of US$30,13 million compared to a budgeted US$27,87 million – a positive variance of 8,11%.
“Furthermore, the operating expenditure was US$11,19 million against a budget of US$19,63 million, resulting in a favourable variance of 43%. The foregoing represented a budget performance of 57%,” Chisangano-Zyambo said.
“On the other hand, the authority’s liquidity ratio continues to show a commendable outlook of 8,71 times of the current assets which would cover current liabilities.”
She further indicated that ZRA’s liquidity challenges over the past four years affected the authority’s ability to make good on the installments due on the subsidiary loan agreement with the Zambian government and other creditors.
On the financial performance budget overview, ZRA said the favourable variance in the operating income was due to over-utilisation of water from Lake Kariba by Zesco Limited and Kariba Hydro Power Company of Zimbabwe.
“The combined water utilisation was 49,76 billion cubic metres (bcm) against an allocation of 45bcm, representing 10% water over-utilisation. Further, the 2020 water over-utilisation invoice was only booked in 2021,” ZRA said in the report.
It further indicated that non-settlement of water sales invoices by Zesa and Zesco and foreign currency control regulations contributed to the adverse liquidity situation.
“The total receivables from the two power utilities amounted to US$72,81 million (US$47,48 million previous year) representing a growth of 53% in the power utilities receivables over the previous year,” ZRA said. “Further, the restricted cash in Zimbabwe was US$13,2 million, bringing the total amount of funds the authority was not able to access to US$86,01 million.
“The authority was able to execute some priority budgetary requirements. It should be noted though that the power utilities continued making payment below average monthly water invoices that led to growth in the receivables,” it said.
The full range of obligations, the authority was still seized with, stood at US$30,55 million with the main components of this obligation of US$21,72 million being payments to the Government of Zambia for KDRP loans and other operating expenditure obligations of US$8,83 million, accounting for 71% and 29%, respectively.
Meanwhile, the authority has a 30-year subsidiary loan agreement dated August 20, 2015 with the Zambian government and according to Schedule 1 of the agreement, ZRA is required to make repayments biannually on March 1 and September 1 of each year.
However, the authority, faced with liquidity challenges, has, over the past four years, defaulted on its repayments on the loan facility resulting in arrears of about US$19,8 million as at December 31, 2021.
According to the agreement, ZRA has to pay a predetermined amount irrespective of the amount drawn down, with the authority engaging the Finance ministry in Zambia to restructure the terms of the loan agreement taking into account its liquidity position.
The Zambian government, in consultation with the primary lenders — the World Bank’s International Development Association and the African Development Bank — agreed to restructure the terms of the on-lending agreement.
Zimbabwe and Zambia established the Zambezi River Authority in 1987, whose primary function is to operate, maintain, monitor and regulate the water level in Lake Kariba.
ZRA is also mandated to construct, operate, monitor and maintain other dams on the Zambezi River, while collecting, accumulating and processing the hydrological and environmental data of the river.