Routes to international capital are narrow for Zimbabwe, and the government is turning to build-and-operate (BOT) contracts to get road infrastructure projects off the ground. However, questions over transparency are likely to arise with each new contract award.
Under BOT contracts, the government picks private contractors to fund and build infrastructure such as roads, border posts and even dams. The investors are then allowed to run the projects over a period, before handing them over to the government. For the public, this means paying higher commercial rates to use roads and border posts, as the investors have to recoup their money before letting go of the infrastructure.
This week, Cabinet awarded a BOT contract for the Harare-Nyamapanda Road and a new border post, only the latest in a string of similar agreements over the past two years.
The latest project aims to upgrade the 238 km Harare-Nyamapanda road as well as modernise the Nyamapanda Border Post, a project expected to take three years. Although the Cabinet statement did not put a price tag on the plan, the Zimbabwe Investment Development Agency (ZIDA) said in a recent quarterly report that the project would cost US$263 million.
“In terms of the Agreement, the Special Purpose Vehicle (SPV), will hold equity in the project and facilitate the flow of funds between the various stakeholders. The Harare-Nyamapanda Construction SPV, based in Zimbabwe, will be responsible for the design, construction and maintenance of the road and border post infrastructure,” Cabinet said on Tuesday.
A consortium of contractors and funders, HENA (Harare-Nyamapanda), made the unsolicited bid in 2023, ZIDA said in an earlier report. The consortium will secure funding for the road and the border post, then collect toll charges to pay for the funding and make its profits.
Cabinet does not mention the companies involved, but industry players say South African contractor Stefanutti Stocks will have a role in the construction of the border post. The company already has a presence in Zimbabwe, having recently completed a conical stack tower at Zimplats.
BOTs: A growing list
Shut out from global capital markets due to debt arrears, Zimbabwe has had to fund critical infrastructure from its own budget, fuelling inflation. The government is now looking at other funding models for big-ticket projects, and BOTs are becoming its favourite route.
In May, government announced a BOT deal with Zwane Enterprises for the US$110 million upgrade of the 120-kilometre Old Gwanda Road from Bulawayo, through Matobo, to Gwanda. In October, government announced a BOT agreement with Bitumen World to refurbish the 760km Beitbridge-Victoria Falls highways.
Cabinet has also awarded the Chirundu Border Post project to Zimborders, the same consortium that led the Beitbridge border upgrade. Zimborders, according to Transport Minister Felix Mhona, was picked for the Chirundu border post project because it had the experience. At Beitbridge, Zimborders, led by transporter Glynn Cohen, raised US$297 million from banks and other investors to upgrade the Beitbridge border post. In return, it will run the border for 17.5 years.
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Forbes Border Post Consortium also got a BOT contract for the border post at Mutare. The Forbes consortium, Cabinet has previously said, was picked “on account of the consortium’s proven track record”. The Mutare project will also include a Christmas Pass flyover and a dry port. Another recent BOT transaction approved by Cabinet is for the construction of a new bridge at the Beitbridge Border Post, awarded to a River Bridge Consortium.
A group led by contractor JR Goddard has also been granted a BOT to build a dam, Bopoma, to supply Bulawayo. The consortium is looking to raise US$150 million for the dam, which they would run privately for 25 years.
A not-so-transparent route?
The BOT contracts have not gone via an open tender, but have been secured via Cabinet Authority. Companies identify potential projects, and submit bids for them. HENA Concessions, awarded the Nyamapanda deal, made an unsolicited bid for the project last year, according to a filing with ZIDA. The bid was then assessed by the agency’s public-private partnership committee, before being sent to Cabinet for approval.
The use of Cabinet Approval, and not open tender, has raised questions over the transparency of the contracts awards. However, government insists this is legal, and that local firms that got such contracts delivered on the Masvingo-Harare highway upgrade.
Government has also experimented with bonds to fund infrastructure. In 2022, the government approved a special bond issue for Exodus & Company, via Platinum Investment Managers, to raise up to US$360 million for the 354km Harare-Kanyemba road project (HEKA) on the local market.
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