China withholds $70 million loan funds

China’s Export Import Bank has stopped disbursing funds under a $144 million loan facility signed in 2013 to fund the upgrade of Harare’s water and sewage works, which has now gone beyond its deadline by a year.

The bank made an initial payment of 50 percent of the project cost but has, since then, refused to provide any further funding for the expansion of Harare’s daily water supply capacity from 520 megalitres to 620 megalitres, which was due for completion in June 2016.

“The contractor stopped working due to disbursement delays. The money has not been released yet. We have had to concentrate on Morton Jaffray and leave the others until the disbursements have come through. If we had that money, we would have finished the refurbishments last year,” Harare’s water director, Hosea Chisango, told The Financial Gazette.

Upon completion, the upgrade would only guarantee 77,5 percent of Harare’s daily water demand of 800 megalitres. Some parts of the capital have had no water supplies for over a decade.

China has grown increasingly frustrated with President Robert Mugabe’s government’s poor debt repayment record. In February, Finance and Economic Development Minister Patrick Chinamasa told Parliament that government had paid off a debt owed by Farmers’ World to China Exim Bank as the firm’s inability to clear its arrears was affecting the flow of credit from the Asian economic giant.

In its audited financials for the year-ended December 2016, the City of Harare reveals that China Exim Bank has not made any further disbursements.

“Disbursements from Exim Bank of China have since ceased, with the total disbursements received amounting to $68 612 741,” the City of Harare reports in its financial statements.

“In addition to the cessation of disbursements, subsequent invoices of work done by China Mechanical Engineering Corporation (CMEC) amounting to $23 979 493 have been received and however not acknowledged by Exim Bank of China in its latest loan statement.”

As a result of the payment problems, major components of the project remain uncompleted. Officials told The Financial Gazette that work at the main Morton Jaffray water treatment plant was at about 80 percent, while not much had been done on the Firle and Crowbrough sewer treatment facilities.

Firle’s design capacity is 144 megalitres, but this is being stretched to as much as 200 megalitres, while Crowborough is three times over its 54 nameplate capacity. Over the years, officials from both the City of Harare and CMEC have pleaded for further disbursements, to no avail.

Harare mayor, Bernard Manyenyeni, said he was not privy to the technical issues relating to the loan facility and referred questions to management. City of Harare spokesman, Michael Chideme, said the disbursement issue was the responsibility of government, and not council.

“It is a government to government agreement and the Ministry of Finance is dealing with the matter of outstanding disbursements,” he said.

Both Chinamasa and his local government counterpart, Saviour Kasukuwere, were not available to comment.

Harare’s water supply infrastructure was originally designed to supply 350 000 people. The infrastructure was upgraded progressively with the last phase commissioned in 1994 to supply 1,5 million.

Before the Chinese-funded project, there had not been any infrastructure upgrade of the infrastructure since 1994. Apart from its own residents, Harare supplies Chitungwiza, Epworth, Ruwa and Norton, with an estimated combined population of 4,5 million.

Much of the city’s water supply infrastructure is over 60 years old, beyond the recommended average 15 years. Harare currently loses 65 percent of all the treated water it pumps out, due to its aged infrastructure. The Financial Gazette