Maggie ‘Schools’ Us on Project Finance
Economy, Opinion
Minister of Finance Hon. Mwanakatwe

When London based Africa Confidential (AC) began publishing a series of articles that highlighted the extent and repercussions of Zambia’s contracted debt, we read with interest where all of this was going. We also took note of the lethargy that came out of the Ministry of Finance in rebutting some of the assertions that were being made. This is the reason we published “Bonds and Sentiment” . With Zambia’s country rating recently being downgraded, sentiment and its consequences must be taken seriously. The AC publications achieved notoriety for the Ministry of Finance hence it was only a matter of time that a statement would be made.

Hon. Margert Mwanakatwe issued a statement (curiously missing from the in which she stated that “the Zambian Government HAS NOT offered any State Owned Enterprise to any lender as collateral for any borrowing. She had noted with concern, in what she termed as a “trend” by some media outlets and individuals who had chosen to deliberately publish misleading information on Zambia’s economic and debt situation. She called out the AC article that was published on 3rd September 2018 aptly titled “Bonds. Bills and ever bigger debt”.

When address the issue of debt and the impact on State Owned Enterprises (SOEs), Hon. Mwanakatwe, schooled us on the provisions in the Loans and Guarantees Authorization Act and the Public Finance Act which stipulates and specifies her as the Minister in charge of loan contraction and debt servicing. Furthermore, there has been no debt default by the republic of Zambia on its debt obligations to the Chinese Government and other Chinese lenders.

The Minister’s statement touched on a number of issues that ranged the nature of the projects Government had in engaged in, to the status of drawdowns on some loans. Making this statement was important. However, although Ministry of Finance’s Public Relations machine may not be as viral as that of “mainstream media”, astute experts in industry will closely watch the statements that come from the ministry.

Now, one has to remember that access to financing has become ubiquitous in Africa. According to, “the value of loans from Chinese financing of energy and infrastructure projects in Africa almost trebled between 2016 and 2017, from $3 billion to $8.8 billion, with policy lenders China Development Bank and China Exim particularly active in helping bridge Africa’s infrastructure gap”. However, for the sake of public consumption, merely stating that these funded projects are PPP (Public Private Partnerships) is not enough for the wearisome native. Therefore, it is incumbent on the Ministry of Finance to provide some level of detail into the nuances of these financial arrangements.

From the face it, finance that comes from the Dragon (China), come in the PPP scheme of BOOT which states for build own operate transfer or BOT (build operate transfer). With the former PPP scheme, Chinese “private sector” stipulate a concession agreement with the Government or entity and obtains the “ownership” of the facility. It is then entitled to design, build, operate and maintain the facility. In addition, as a private partner, they also provide funding project and hence will have rights to retain some or all of the revenue for a period time that come from managing the facility. This is why concessional period must be sufficiently long so as to enable private partners to pay back the investment and get an adequate return on investment. At the epilogue of the concessional period, the facility is then handed back to Government.

The Chinese are known to come with the complete package that includes, Transaction advisors, Financiers, Operation & Maintenance, Engineering, Procurement and Construction (EPC) contractors. This is why many African countries have sought comfort in the bosom of the east. With FOCAC (Forum on China Africa Coorporation) set to invest over $60 billion in financing for projects in Africa in the form of assistance, investment and loans, we expect a substantial portion of these funds will be found packaged in some of the different types of PPP schemes.

The challenge of lack of empowerment will become more real should governments not legislate mechanism that will bring about more participation of local companies. On the one hand, local companies do not have access to affordable capital whereas their Chinese counterparts come finance that has a minimal cost of capital.

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