US$206m DBSA loan haunts Zinara…new board restructures facility…advisor to review Intertoll contract

17 Jan, 2020 - 00:01 0 Views
US$206m DBSA loan haunts Zinara…new board restructures facility…advisor to review Intertoll contract

eBusiness Weekly

Hebert Zharare Business Weekly Editor

The Zimbabwe National Road Administration (ZINARA) is struggling to pay back a US$206 million loan it got from the Development Bank of South Africa (DBSA) to rehabilitate Plumtree-Bulawayo-Mutare highway and is now being forced to source money outside toll related revenues to avoid defaults, Business Weekly can reveal.

ZINARA entered into a tolling deal with a South African firm — Intertoll Africa to raise money to pay back the loan from DBSA which has since turned out to be an albatross on its neck with collections falling short of requirements following currency reforms.

Business Weekly also understands that other ZINARA revenue streams including fuel levy, abnormal and overload charges as well as transit fees — were fast declining resulting in the administration at times defaulting on loan repayment. Monthly instalments amount to about US$3 million including US$1,45 million in interests.

The ZINARA/Intertoll tolling deal came after the completion of the construction of the 880 kilometre highway, probably the biggest road investment undertaken by the Government in nearly 40 years, by Group Five of South Africa-now under liquidation.

Group Five owns Intertoll.

The scope of works on the rehabilitation

of the highway, which started during the inclusive Government era between Zanu-PF and two MDC formations, involved 50 percent resealing, 29 percent shoulder widening and surfacing (7m to 10m), 21 percent reconstruction in some sections and 9 percent state-of-the-art toll gates installation.

Following the construction of the road, ZINARA and Intertoll formed Infralink under a 70/30 shareholding arrangement respectively to manage 10 tollgates along the highway to contribute towards loan repayment, road maintenance among other things.

But the state of the financial situation at the administration has since prompted the new board led by Michael Madanha to institute some emergency survival measures including restructuring the loan facility as well as engaging a transactional advisor to assess the implication of this Private Public Partnership to the country.

The PPP was entered into in 2012.

Investigations by Business Weekly also revealed that coupled with the exchange losses following the re-introduction of the Zimbabwean dollar and some technicalities on the contract that saw numerous fixed costs being heaped on Zinara, it emerged net income in some cases is no longer enough to cover some key obligations.

Said Madanha: “The DBSA loan agreement was backed by three revenue streams namely: fuel levy, abnormal and overload charges and transit fees. At the time of the agreement these inflows were all in US dollars and were enough to repay the loan.

“However, when the economy shifted to local currency, it became difficult to find enough foreign currency to repay the loan, which then put the loan into arrears. This was worsened by tax garnishes on Infralink of US$46,97 million emanating from the tax status of Infralink; the Special Purpose Vehicle.

“In order to salvage the situation, a loan restructure agreement was crafted and ZINARA has engaged a transactional advisor to carry out due diligence on the whole deal before the board approves the loan restructure. In the meantime, we are making monthly interest payments of US$1,45 million. The loan restructure deal will require quarterly payments of US$$7,05 million which translates to US$$2,35 million per month. The current loan deal required quarterly payments of US$$9 million (US$$3 million per month.)”

However, the loan that was supposed to be liquidated in the next two years might see Zimbabwe paying more in compounding interests due to defaults the new board is fighting to clear.

The loan deal has also compelled ZINARA to pay a South African business tycoon Niko Shefer US$300 000 as facilitation fee for the $206 million loan from DBSA. Coupled with the high fixed charges, facilitation fees and exchange losses, an internal report prepared late last year and seen by Business Weekly revealed collections were failing to cover all the monthly dues.

The agreement is, after cash collections from tollgates, all the money is banked and shared 70 percent  (ZINARA) and 30 percent (Intertoll).

However, there are many cases especially late last year when collections were so low and that after some expenses they ended up in the negative.

“The contract provides for cost plus model. Therefore, all the claims are cost driven and are pushed up by the black market rates of foreign currency and inflationary trends,” reads the report.

According to the report, from January 2019 takings of $2 248 933 from tollgates, ZINARA received $457 291 or 20 percent); out of $2,28 million collected in February, the national road administrator only got $102 830.

In March, from $2,47 million, only $69 656 or 3 percent was pocketed by Zinara.

The situation worsened in April when expenses escalated. From revenues of $2 74 million, Zinara ended up forking $1,2  million (negative 43 percent) from to pay Intertoll.

The situation improved to positive 3 percent in May before worsening in June and July where figures slipped in negative 52 and 58 percent respectively following increase in toll fees.

According to insiders, the exorbitant fixed costs in South African Rand were now taking a toll on ZINARA revenues after they were reviewed upwards in August 2015 in accordance with a letter from Intertoll representative, Morgan Govender.

Wrote Govender to Zinara; “Intertoll Zimbabwe takes note of the contents of the letters and the confirmation by DBSA of the amendments to the existing operations and maintenance contract. We hereby confirm that we accept the amendment to the existing contract a copy of which is attached to this correspondence.”

Madanha confirmed that there was a period
when collections had sunk so low and only to be rescued by a tollgate increase that was effected in August last year.

“Yes; collections from Intertoll between March and July were not enough to cover road maintenance and toll management costs mainly because when the economy migrated to the local currency; major elements of road maintenance costs especially imported materials continued moving in tandem with exchange rate; while toll fees had remained stagnant in ZWL$ terms.

“The position was corrected when toll fees were increased in August 2019 and management continues to monitor the behaviour of the cost and revenue so that there is enough revenue to cover the costs and return on investment.

“However, the behaviour of the toll management cost is a major concern as it is cost plus which is not related to revenue. To address this, Zinara has engaged an advisor to review the contract terms,” he said.


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