VIOLET MENGO, Lusaka
DEMAND for quality road infrastructure remains high in Zambia.
This is because a good road network is critical in stimulating needed economic growth through increased trade within the country and the region.
While the road network in most parts of the country calls for overhaul, one major road critical for improved economic performance is the Lusaka-Ndola road.
Many travellers and motorists using this road to deliver goods and services between Lusaka and the Copperbelt Province have over the years been issuing complaints about the deplorable state of the road.
While the resource envelope is not adequate to bridge the financing gap, the new dawn government adopted the public-private partnership (PPP) mode of financing on the Lusaka-Ndola road.
Minister of Infrastructure, Housing and Urban Development Charles Milupi, in a ministerial statement presented in Parliament on Thursday March 9, 2023, explained that the PPP model will generate jobs and spur social and economic growth.
“The PPP financing model will guarantee infrastructure development and service delivery using private capital given the challenging fiscal position of our country resulting from both the poor performance of the economy and the huge and expensive debt left by the previous regime,” Mr Milupi said.
On Thursday March 2, 2023, Speaker of the National Assembly Nelly Mutti directed Mr Milupi to issue a ministerial statement on the agreement signed on Tuesday February 28, 2023 for the upgrading to dual carriageway of approximately 327 kilometres of the Lusaka-Ndola road, including rehabilitation of 45 kilometres of the Luanshya-Fisenge-Masangano road using a PPP model of project procurement and financing.
Mr Milupi explained that the PPP procurement process used to procure the current project is premised on principles of competition, transparency, fairness, equity and cost-effectiveness.
He took Members of Parliament through the process that the Road Development Agency had taken so far. The process consisted of the following stages:
i. Project concept preparation stage;
ii. The call for requests for expression of interest;
iii. The issuance of request for proposals;
iv. Evaluation; and
v. Negotiations.
The Road Development Agency (RDA) submitted the project concept note for the project in line with the PPP Act No. 14 of 2009 to the Ministry of Finance and National Planning for review, consideration and approval in 2021.
Authority was granted for RDA to proceed with the procurement of the project through the solicited approach.
The call for expression of interest was published in the print media on February 16, 2022. Seven proposals were received on March 11, 2022.
The proposals received were evaluated from March 11, 2022 to March 21, 2022 and two firms were responsive to the stipulated evaluation criteria and were thus shortlisted.
The firms shortlisted were as follows:
i. Messrs Macro Ocean Investment Consortium – represented by AVIC International Project Engineering Company, Zhejiang Communications Construction Group Limited, and China Railway Seventh Group Limited;
ii. Yamene – represented by Velos Enterprises Limited, Graduare Property Development Limited, Yamene Financial Services Limited, and Hillary Construction PTY Limited.
On July 24, 2022, the PPP Council considered the request for approval of the due diligence exercise that involved visiting the bidders’ past project sites, both local and outside the country, and the bid evaluation reports for the current project.
Messrs Macro Ocean Investment Consortium was then conferred with the preferred bidder status in line with the PPP Act No. 14 of 2009 as amended.
“The Government awarded the concession agreement to Messrs Macro Oceans Investment Consortium for the upgrading to dual carriageway of approximately 327 kilometres of the Lusaka to Ndola road, including rehabilitation of 45 kilometres of the Luanshya-Fisenge-Masangano roads, using a PPP model,” Mr Milupi said.
Salient features of the project
The scope of works includes design, engineering, financing, procurement, construction, completion, operation and maintenance of the project infrastructure and involves the construction of 327km of a dual carriageway from Lusaka to Ndola.
It also involves the construction of Kabwe and Kapiri Mposhi bypasses, rehabilitation of 45km of the Masangano-Fisenge-Luanshya road and construction of two new toll plazas.
The minister said it will also involve the construction of two weighbridges, and expansion and improvement of existing bridges along the entire route.
The concession period will be 25 years split into two: three years for construction and 22 years for operations and maintenance.
“The operations and maintenance will be at no cost to the Government. The 25 years concession period was arrived at after looking at the level of investment and payback period involved. It also took into account what the public can afford in terms of toll charges, and the agreed revenue share mechanism between Government and the concessionaire,” the minister explained.
To protect the interest of the Zambian people, the new dawn government has put emphasis on delivering projects and services at the right price, quality and within time.
“The concession agreement was signed based on the fundamental features of the legal framework governing PPP in infrastructure development, namely affordability to the public and value for money to the Government,” he said.
Mr Milupi said the quality of the roads is evidently good with acceptable level of service.
Government has adopted the PPP approach to deliver the much-needed regional network to both local and international traffic to match up with international standards considering the current fiscal position.
Mr Milupi said the use of the PPP model guarantees quality as the concessionaire is keen to produce a quality road as failure to do so by implementing the project below approved specifications will result in premature failure of the road, resulting in costly maintenance and early rehabilitation at the cost of the concessionaire.
“As promised, the new dawn administration is undertaking road infrastructure projects at the right price, specified quality and timely delivery and, again, this is on the understanding that all the risks associated with the funding mechanisms are to be borne by the concessionaire, with no assistance and at no cost and risk to the Government,” Mr Milupi said.
The total cost for the Lusaka-Ndola dual carriageway project is US$649, 976, 167, broken down as follows:
i. US$577, 383, 758.00 – construction cost;
ii. US$1,000,000.00 – working capital;
iii. US$1,849,500.00 – finance costs;
iv. US$69,742,909.00 – interest during the construction period.
Since the project will be financed using the PPP model, the concessionaire is free to engage and propose would-be financiers.
“NAPSA are not the only ones likely to be approached for possible investment in the project, they are just part of the possible funders. The funding mechanisms for the project are entirely the responsibility of the concessionaire, and Government will not provide any assistance or sovereign guarantee,” he said.
He said the task of attaining financial close is the responsibility of the concessionaire, and he is free to approach any interested investors within and outside Zambia with the appetite to invest in the project.
Toll collection
The toll revenue collection to be executed in this PPP concession agreement is in line with the Tolls Act No. 14 of 2011, which is the principal Act providing for the operation of toll roads – the charging and collection of tolls – and provides for private sector participation in the tolling of roads.
Under PPP, private entities or concessionaires will be appointed as toll collectors on prescribed toll roads. In the past those appointed have included National Road Fund Agency (NRFA), Zambia Revenue Authority (ZRA) and Road Transport and Safety Agency (RTSA).
The Government and the concessionaire have agreed to a revenue share mechanism based on gross revenue. The percentage share to Government shall range from 1.5 percent to 15 percent of the gross revenues over the 25-year period.
Government envisions to accrue US$1,172,157,616.00 in monetary benefits from the project over the concession period, broken down as follows:
i. Government share of total gross revenues US$ 432,064,717.00
ii. Income/ corporation tax – US$ 660,344,643.00
iii. withholding tax on dividends – US$79,748,256.00.00
Benefits to Zambians
According to the minister, the benefits to Zambians lie in the uniqueness of the road section.
“This section connects the continent, region and domestic corridors to the world. Once done, citizens and the region’s social and economic status shall be uplifted,” he said.
Mr Milupi said travel times will improve between Lusaka and the Copperbelt Province as there will be continuous flow of traffic because of the road being a dual carriageway and in good condition.
He said it will enhance safety as a result of dualisation, and citizens trading and living along the project road will benefit from increased traffic volumes that will be generated from the rehabilitated road.
Zambia National Marketeers Association (ZANAMACA) president Mupila Kameya says the dual carriageway is a welcome development but that it should be built within the stipulated time frame.
“We have most of the trucks getting into Congo and getting back from South Africa, Mozambique, Angola and Malawi which use that route. Sixty to 70 percent of the people who use that route come from the informal sector. It is either they are bringing in their goods or taking their goods out,” Mr Kameya said.
He said once completed, the road will speed up trade into Congo and the traffic will reduce.
SADC Truck Drivers Association of Zambia president Eugene Ndhlovu commended Government for living to their campaign promises and also as reflected in the UPND’s manifesto to improve infrastructure.
“The dual carriageway from Lusaka to Ndola is long overdue looking at the current state of the road. It has now turned from an economical road to a deathtrap,” Mr Ndhlovu said.
He said members of the association suffer serious consequences because of the deplorable state of the road.
“Nearly every day we record fatal accidents and innocent lives are lost while property is damaged. This is something that should not be entertained,” he said.
“We hope to see works kick-start as soon as possible as this development will bring a lot of benefits to our people in terms of turnaround time. People will be able to move quickly to and from the Copperbelt, which is a powerhouse in terms of mineral resources.”
He stated that because of the deplorable state of the road, it has actually become an extra cost due to tear and wear on vehicles.
Mr Ndhlovu is hopeful that once the roads are done, transporters will be able to maximise their profits, leading to improved working conditions for the members.
“The construction of this road is very important. We also want to take advantage to appeal to RDA to make sure that our engineers do not settle for anything less in the construction of the road,” Mr Ndhlovu said.
“We have seen such big projects being misused where the people that are given the mandate to construct end up coming up with shoddy works. We want people to critically look at the standards which should be superb. Going forward, we will sensitise our members on the importance of maintaining the required numbers in their vehicles because overloading, especially on the Copperbelt, is something that compromises the lifespan of the roads constructed at high costs,” he said.