China Eximbank provides $140.8 million buyer’s credit loan for Rehabilitation of Municipal Water and Sewage Treatment Works Project (Linked to Record ID#63444)

China Eximbank provides $140.8 million buyer’s credit loan for Rehabilitation of Municipal Water and Sewage Treatment Works Project On March 21, 2011, the Government of Zimbabwe and China Eximbank signed a $141.3 million buyer’s credit loan (BCL) agreement for Rehabilitation of Municipal Water and Sewage Treatment Works Project.

Zimbabwean Vice President Joyce Mujuru signed the loan agreement in Harare.

The loan agreement followed the signing of a 2010 Memorandum of Understanding (MOU) by the Chinese Government and Government of Zimbabwe for the financing of various development projects. Officials from Zimbabwe’s Ministry of Finance, representatives from China Eximbank and Sinosure signed the MOU.

Sinosure agreed to provide insurance cover for various loans issued by China Eximbank.

However, its face value was subsequently revised to $140,825,714.38.

The purpose of this project was to support the development and rehabilitation of water works and sewers in the Zimbabwe’s capital, Harare.

More specifically, the proceeds of the loan were to be used to rehabilitate, replace, install and commission equipment at the Morton Jaffray water treatment plant, the Prince Edward Water Treatment plant, the Crowborough sewage plant, the Firle sewage plant, and pump stations at Warren Control, Alex Park, and Letombo.

Some of the loan proceeds were also earmarked for information technology and automated billing activities, the acquisition of water treatment chemicals, the installation of laboratory, the installation of pressure-reducing valves, and the installation of prepaid meters in 500,000 households.

China National Machinery and Equipment Corporation (CNMEC) was the contractor responsible for implementation of the project. This project officially entered into force on January 26, 2013, but it was plagued by various delays and controversies.

In 2013, China Eximbank reportedly withheld loan disbursements due to the Government of Zimbabwe’s failure to meet its outstanding obligation under a 1997 loan that it provided to Zimbabwe Iron and Steel Industries (See Record ID#17125). In September 2013, 19 Chinese engineers joined a larger 46 engineer team to work on the project.

Then, in June 2014, the deadline for project completion was pushed forward from April 2016 to June 2015.

As of June 2014, several areas previously not receiving water had access and obsolete equipment was removed from facilities, the Morton Jaffray water treatment plant was operating at 70 percent capacity, and two pressure-reducing valves were installed at Warren Park D and Ardbennie.

A month later, in July 2014, an investigation was launched after the Harare City Council was accused of spending $8 million of the loan proceeds to purchase 25 luxury vehicles.

Harare City Council insisted that the vehicles were for service deliveries; however, China Eximbank decided to withhold loan disbursements after learning that the loan proceeds were not being used for the intended purposes. As of June 2017, only half of the China Eximbank loan (approximately $72 million) had been disbursed.

As of February 2020, China Eximbank was still withholding loan disbursements for this project. There is also evidence that the Government of Zimbabwe has fallen behind on its loan repayment schedule. As of 2018, the borrower had accumulated principal and interest arrears and penalties worth $28,430,361.10.

Also, according to a report released by the Debt Management Office of Zimbabwe’s Ministry of Finance in mid-2022, the loan was still in arrears at the end of 2021.

Total external debt arrears to China Eximbank at the end of 2021 included $13 million for the NetOne Expansion Phase 1 Project, $47 million for the NetOne Expansion Phase 2 Project, $67 million for the Rehabilitation of Municipal Water and Sewage Treatment Works Project (City of Harare Project), $7 million for the National Defence College Project, $54 million for the Victoria Falls Airport Renovation and Expansion Project, $3 million for the Robert G.

Mugabe International Airport Expansion Project, $0.5 million for Phase 2 of the TelOne Broadband Expansion Project, and $73 million for the Medical Equipment and Supplies Project. The loan’s amount outstanding (including principal, interest, and arrears) was $80,640,308.76 as of September 2021.