New investment model powers energy project

China buys equity in Zimbabwe electricity plant project, signaling a major shift away from loan-based African aid, says official

Chinese contractor Sinohydro has purchased equity in the $1.4 billion extension of Units 7 and 8 of Zimbabwe's Hwange Power Plant, signaling a major shift in China's investment policy toward projects in Africa, a senior Zimbabwe government official said.

Engineer Benson Munyaradzi, a principal director with the Ministry of Energy and Power Development, said China, which recently financed the construction of the Kariba Power Station, had invested in Hwange 7 and 8 instead of providing a loan.

"We recently commissioned the Kariba Power Station, which added 300 megawatts to the national grid. This was through cooperation with China, who funded this project through a $345 million loan, and we provided 15 percent funding of the total project cost.

"We are looking again to China to do the same on the Hwange 7 and 8 power project. I would say China's policy in investing in Africa and the world has changed, and we have seen this through these two projects, where in the first project China offered us a loan but in Hwange 7 and 8 they are investing in the project," Munyaradzi told an international Belt and Road infrastructure initiative conference, organized by the Confucius Institute at the University of Zimbabwe on Aug 24.

For the extension of Hwange 7 and 8, Sinohydro has formed a joint venture company, Hwange Extension Supply Co (Hesco), with Zimbabwe Power Co. Sinohydro owns 34 percent of the project, with the remainder held by ZPC.

"Upon project completion, Sinohydro will run the power plant for 10 years to recoup their investment and ensure continuity. They are investing their money in the project to ensure its success. To us, this is a change in the investment policy of China, where previously they would just give you loans which you would repay," Munyaradzi said.

The extension of Hwange 7 and 8 is expected to add 600 mW to the plant's current capacity of 920 mW being fed into the national grid. The project is expected to create more than 7,000 jobs.

During the past few years, Zimbabwe has failed to implement many of its scheduled energy generation and transmission projects due to a liquidity crisis and sanctions by the West. This has prompted the government to adopt its Look East policy, which has prioritized its relations with China and countries from the Eastern bloc.

Munyaradzi said that for Zimbabwe to achieve its ambition of becoming a middle-income state by 2030, it would require 11,000 mW and, with a current installed capacity of only 2,000 mW, it would need China, through its Belt and Road Initiative, to achieve the goal.

Speaking at the same conference, Professor Charity Manyeruke, dean of Social Studies at the University of Zimbabwe, said the Belt and Road Initiative heralded a new development path for Africa and China that, through the rapid development of infrastructure, would create jobs for Africa and facilitate trade, which was currently inhibited.

Historian Taderera Herbert Chisi said Africa needed the Belt and Road to satisfy its appetite for investment and infrastructure. The Belt and Road "will instill development in Africa, reduce poverty and raise standards of living through the development of road networks, power and transport infrastructure," he said.

"In return for its investment, China wants to secure markets and resources for its development. I also see the plan spurring the spread of the yuan in many parts of the world."

However, he said, Africa was not fully prepared to deal with China because it did not have a clear strategy and policy for dealing with such a major nation.

"Africa needs China and the OBOR because we don't have the capacity to develop on our own. OBOR has great potential to address Africa's infrastructure gap, but if African countries do not strategize well, the OBOR is very likely to lead to enormous debt and the flight of resources, which will stall Africa's development," said Chisi.

Tafara Mugwara, a public and foreign policy expert at Xiamen University in China, said that, notwithstanding the rapid infrastructure improvements brought about by the Belt and Road Initiative, it also presented significant risks.

Mugwara said African governments must ensure that Chinese-financed projects are economically viable and leverage Chinese partners to contribute to long-term capacity building.

The Belt and Road Initiative was proposed by President Xi Jinping in 2013, with the aim of building trade and infrastructure networks connecting China and the world via land and maritime routes.

For China Daily

(China Daily Africa Weekly 09/07/2018 page30)