The 1.2 billion dollar dual carriageway-Who will actually pay for it?

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File:Works on progress on the Lusaka-Ndola dual carriageway costing $1.2 Billion in chibombo District

By Trevor Simumba

During the ground-breaking ceremony for the Lusaka-Kapiri-Ndola Dual Carriageway project, the Chinese Ambassador to Zambia stated an old Chinese proverb that goes, “build your roads first if you want to get rich”.

Transportation infrastructure is crucial to the economic and social development of a nation.

Zambia has many favourable natural endowments for its development, however, subject to poor infrastructure, a fair amount of its economic potential cannot be fully tapped.

The project of the Lusaka-Ndola Dual Carriageway was mooted over four years ago as part of the Link Zambia 8000 project and the process of selecting a PPP contractor started in 2015.

In 2015 a Restricted Invitation to Tender was issued by the RDA (Ref: RDA/PPP/CE/001/15). The RFP stated that the RDA, intended to enter into a Public-Private Partnership Agreement in form of a concession to undertake the upgrading of the Lusaka to Ndola road to dual carriageway.

This Request for Proposals (RFP) solicited for financially and technically competent prospective concessionaires to Finance, Design, Construct, Operate, Maintain and Toll the proposed road projects. Below are the original specifications:

1. Lusaka to Ndola (T002/T003) approximately 321 km, including Kafulafuta to Luanshya Town (M006), approximately 45 km;

2. Construction of new carriageway lane road, 6.8m wide with 2.0m wide shoulders, with Grade Separation where required;

3. Median separation (9.2m in rural areas and 2m in urban areas);

4. Service lanes on either side of the road in urban areas with pedestrian traffic accommodation facilities including walkways, cycle tracks, walk-over bridges, etc;

5. 50mm Asphalt Concrete on 200mm crushed stone base and 300mm cement stabilised sub-base or alternative subject to approval by the Client;

6. Construction of two bypasses around Kapiri Mposhi and Kabwe central business districts;

7. Major drainage works – construction of bridges and culverts;

8. Rehabilitation/reconstruction in selected sections of the existing road, with 2.0m wide shoulders;

9. Construction of Toll Plazas at designated toll sites; and

The Bidder was to propose the construction and concession periods, which shall be subject to negotiation. As can be noted from the above this was purely a road upgrading project without all the other added commercial provisions that the Minister highlighted to justify the new high cost of the project.

All the bridges and by-pass roads were already factored into the project costs.

According to the RDA RFP the Economic Internal Rate of Return (EIRR) this road was approximately 29 per cent and the cost of construction was estimated at K930 million.

However, the Minister of Infrastructure and Housing in his Ministerial Statement to Parliament stated that the total contract sum is US$1,245,775,986 (approx. K11.1 billion) which is a huge jump from the original estimated K930 million).

More importantly he stated that EIRR was now 15% and that the contract had been varied and that it was no longer strictly a PPP as the contractor had obtained a loan for the project.

The Minister further stated that the selected financial model has a payback period of seventeen years, with an internal rate of return of 15 per cent. This rate of return is 50% lower than the original one even though the Minister stated that this was a very good rate of return!

The project under the selected model further shows that the project will generate gross revenues of approximately US$3.5 billion over a period of seventeen years after commencement of operations.

Even with the assurances from the Minister public perception of high level corruption in this project persists.

Initially during the Groundbreaking ceremony, it was stated that the Government had obtained a loan of 1.2 billion dollars from China Exim Bank.

This has been confirmed in the RDA 2018 Approved Road Sector Annual Work Plan (RSAWP) that shows a disbursement of K1.4 billion ($147 million = $1.7 million per km of works) for 86 km worth of works for the period covering 2018 and indicates the source of funds as China Exim Bank.

More significantly, the Government of Zambia has provided a sovereign guarantee for these funds which means if something goes wrong the Zambian public will have to pay this debt.

The Minister of Finance in his 2018 budget address stated: “Mr. Speaker, the recently launched Lusaka – Ndola dual carriage way is one of the most critical economic roads. Let me hasten to mention that this project consists of two phases. Phase I will be the construction of the dual carriage way, while phase II will involve the construction of auxiliary infrastructure which includes hotels, toll gates and service stations. Phase I will be financed through Public Private Initiatives while phase II will be financed through private sector participation.”

The question that lingers is why Government is taking all the risk even for the private sector commercial projects on this road and if the internal rate of return is so good why is the Chinese contractor is not able to finance the project without recourse to sovereign guarantees.

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43 COMMENTS

  1. Very good points raised. Indeed these are the questions that need answers from RDA and let them clarify on all these issues. One point though, it’s not so strange in Project Finance to issue sovereign guarantees if the risks are considered high. Another method is to seek for availability payments. Which is basically the client paying the developers for making the facility available, whether income is generated or not.

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    • PF cadres, don’t hide. Please comment. Feel free to insult as usual if you have no argument to present.

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    • Silly nonsensical article.

      Of course Tax payers and there NOTHING wrong with that.

      You pay tax and Government do what they have always done- ie invest back in the economy.

      Trevor you have started drugs now

      I am a PhD holder from University of Glasgow

      Thanks

      BB2014,2016

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    • This purely another ploy for Lunga , Kaiser and the RD guys to steal money or lie that part of the $30billion borrowed going to used for such projects.
      Lunga and Kaiser are violent thugs who have no shred of sympathy to the suffering Zambian..

      Watch the videos “Lunga and Kaiser are thieves” and “arise zambia muntu2” on YouTube to send a clear message to Lunga and his crony to prepare for fate.

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    • It’s good to question things but it’s always problematic to do so with agenda to get public against project with objective of seeing good project fail. This is what happened with Referendum on Bill of Rights. Every bit of that instrument was intended for benefit of every Zambian but section of politicians managed to speak ill of it for their selfish benefit to extent that it’s Zambia that lost not their opponents. The dual carriage between Lusaka and CB is project that should’ve been done long time ago. The positive implications of this projects are far reaching compared to differences in amounts being peddled here. The goal for us Zambians is to get this project completed soon. If anybody does any thing wrong in process law will catch up with them. Let’s not stand in way of progress…

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    • Dear Mexico will pay for it.
      What sort of question was that, who pays for everything else?

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  2. Zambians are happy & satisfied with the vile corruption happening under the able Dununa leadership of Comrade Jona Chagwa.
    ENJOY, DON’T CRY!!

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  3. An explanation as to what led the IRR to be revised need to be made. This again is not so strange as the detailed financial appraisals could have revealed that actually the IRR at pre-feasibility stage was optimistic. This is mostly due to project promoters being over optimistic on the traffic growth. So usually the model is adjusted to a more realistic scenario.
    RDA needs to give us these details

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  4. Well it’s good Project but my only question why was do we want to build new route to Ndola? Free from that congested kabwe lusaka Road. Like that we are expanding developing but right we are only improving standards which if u weight that two u can achieve with same amount of money used

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  5. Unfortunately this is an ancient language for the likes of BR Mumba and his cohort, they take no interest in reading and learning of such.

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  6. Now, if someone called you ubupuba, kuti mwakana? Umuungulu abena Zambia. Someone is stealing right in front of you. Firetrucks, Ambulances, eSwatini mansions, $150 millions in Tasila’s purse, Lungu signs $500 million instead of $350 million asked for by ZESCO, why?. The list is ongoing. Muli ndwiii.

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    • You forget to mention that the Minister of Infrastructure and Housing was already under ACC investigation and his name still keeps popping up here and there …this is the man overseeing this overpriced contract.

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    • Zambians dont mind how much something costs so long as its finished and they are using it …roads like Chingola – Solwezi road can even come to a cost of half billion in overruns, misappropriation and suspensions of the project over the years but that does not matter to docile Zambians….Lumumba Rd in Lusaka can be priced at 100 million dollars just finish it even put street lights as a bonus even if the road costs 20 million they wont mind.

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  7. The article is well articulated….the problem is nothing will ever happen after this because the opposition do not understand it as well.

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    • There is no way this dual carriageway could have been cost at K930 million. Obviously, there is stealing but let’s learn to dig deeper and present facts.

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  8. What surprises me with you the so called educated morons is your lack of praising what is good.

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  9. I am sure like the economic writer knows that there are various classes and various methods of projects contracting from PPPs PPAs IPPs and other hybrid new evolving methods the list goes on
    The challenge in pricing is these Ultra mega projects of public good Ultra-mega projects such as this LUSAKA NDOLA dual carriage way requires a SOVEREIGN GUAREANTEE because of its magnitude and Capital outlay The Investor would want to be assured that once its financed and consummated any successive government in the years to come will honour the Investments returns and repayments The project is well crafted The writer should understand that there is also a…

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  10. a difference between ECONOMIC AND FINANCIAL assessments of PROJECTS of this magnitude especially as reflected in the “PUBLIC GOOD PROECT” There is a difference between appraising a Public Good project using pure FIRR and EIRR For a typical project like the Lusaka Ndola dual carriage way with huge PUBLIC GOOD externalities It gets exciting and challenging to see the broader benefits and costs along the project corridor
    A typical private sector led road project, as seen from your analysis, will ignore feasible beneficial externalities for the people along the corridor ,the people of Katuba Chibombo Kabwe Kapiri Mkushi Ndola Luanshya Kitwe chingola and Solwezi A…

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  11. public good project will ,unlike your analysis will little ,place emphasis on FIRR and look at the broader benefits and long-term developments along the projects corridor A typical , like this writeup private sector led analysis, will discount and reduce the assessments to single streams of benefits(revenues and well-being) The private sector led analysis will only focus on the narrow and ignore extended externalities The public project is not very much interested in FIRR and in the NATIONAL WHOLE SOCIAL OR ECONOMIC BENEFITS
    I will not talk about te economic rationale of UTILITARIAN but that also show benefits to accrue to the future generation if well reinvested Its…

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  12. I wish our national budget was $30bn like Kenya or $50bn like Angola then we’d easiy fund this wonderful road dualling project to fruition.

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  13. Its suffices to also mention that there is often a challenge in assigning discount rates in PUBLIC GOOD PROJECTS but this dual carriage way is fairly bench marked and priced and evaluated and that cost of capital is fairly reflective and if implemented according to the projects scope will yield immerse benefits for the people of SOUTHERN LUSAKA CENTRAL COPPER BELT AND NORTH-WESTERN

    The returns will accrue far beyond the computation and protected

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    • Absolute nonsense. Can you calculate how much it is costing Zambians per km to construct this road? Mind you, they are constructing half of it. One half exists already. Same roads in same terrain in our neighboring countries cost way way way cheaper. Do some due diligence research before you excite yourself with explanations that do not touch on the truth. The benefit would be way better if no crimes are committed on the nation. These are crimes with real people as victims. The all nation is a victim.

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  14. Nakonde to Chinsali road. The Great North Road is worse than any road you can imagine. Yet all fuels come along same road with accidents all the way.We dont see???? RDA why ?????, Learn to spread you butter bafik………

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  15. For the sake of development, let us allow this project to proceed without putting up unnecessary objections. Are we bewitched that we don’t want our country to develop?This project is for public good. Put politics aside. I know some opposition leaders and their sympathisers wouldn’t want this government to succeed purely for selfish motives. Ignore them because they are up to no good. If there is corruption, there are sufficient laws to deal with such people. People will always talk even where something is straightforward.

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  16. A Useless Pawn on the chessboard trying to comment on matters of the nation – a self-styled economics expert, like HH! Please go away we know your interests and your sponsors!

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  17. When one asks in broad daylight whether the dog is male or female, others end up thinking he is blind and cannot see. Who’s going to pay is the beneficially of the road today or in the future.

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  18. its cheap developmental finance for the towns and cities and provinces have mentioned above The road when you look at it in broader sense will address the issues of mobility and address the need for development in the cities and foster economic growth around the corridors along the road Its like a river THE ROAD WILL ALSO ADDRESS THE UN HABITAT REPORT FOR 2017 FOR BETTER AND DEVELOPED URBAN CITIES APART FROM LUSAKA NDOLA KITWE AND LIVINGSTONE Its about Planning and Designing of Cities and other Human Settlements What i should be spending time is supervisions of the projects to ensure quality and hardened roads and infrastructure in that capital spend okay This is…

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  19. This is also addressing the issues of income growth if only productivity is prioritized The Chinese ambassador was truly right by saying build a road for progress and economic growth in the figurative sense but that should not simply drive commodities but commerce and goods native in those cities

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  20. @#20, Oh yes we know when the dog is male and female in day broadlight! If it is in the dark, then that would be another story.

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  21. If P-F FOOL _S were serious about development, this dual carriage should have run from Livingstone ,as stated above, to Solowezi. Unfortunately , they are so myopic and busy enriching themselves.

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  22. If there was a person in Zambia serious about development, this dual carriage should have run from Livingstone ,as stated above, to Solowezi. Unfortunately , they are so myopic and busy enriching themselves.

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  23. I really CRY for my country ZAMBIA.This is a very good statement ,and this is the reason why we having high taxes.The country can not develop like this full loans ,high taxes and we are even failing to utilize the same loan.kkk…..please..! Look at Chingola-kitwe dual carriageway,a 35 to 40 km project has been running for five years now.What about the Lusaka-Ndola project?…Please have the HEART for our Mother Zambia ,this country has got money just take a look at this beautiful land full minerals,fertile soil and rivers,let us make use of JEHOVAH gave us.The thing that is killing us is having people who does not think of development but fattening there pockets.
    My QUESTIONS are ::
    (1)How are you going to pay back these loans?
    (2)who is accountable for the same money you keep…

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  24. The title is misleading by implying reference to the entire project when the question is really supposed to target financing of the auxiliary infrastructure which is to be put up by the private sector. This is far below smart Trevor I know!

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