HARARE – Several State-owned enterprises in Zimbabwe are reportedly struggling to repay loans secured from the China Export-Import Bank (China Eximbank) between 2013 and 2018, which funded critical national capital projects, The Sunday Mail has reported.
The loans, described as semi-concessional, were on-lent by the Government to entities such as the Airports Company of Zimbabwe, Zimbabwe Power Company (ZPC), TelOne, and NetOne to support the expansion of electricity generation, upgrades to international airports, and improvements in telecommunication infrastructure—key drivers of economic growth.
Projects funded through these loans include the US$300 million upgrades to the Robert Gabriel Mugabe (RGM) International Airport and Victoria Falls International Airport, implemented by the Airports Company of Zimbabwe. Additionally, ZPC utilised approximately US$2 billion for the Kariba South hydroelectric plant expansion and two new units at Hwange Thermal Power Station, while TelOne modernised its network with nearly US$100 million. NetOne also benefited from a significant amount for its three-phase broadband network expansion.
Mounting Arrears and Interest Burdens
According to the 2024 Public Debt Report released by the Ministry of Finance, Economic Development, and Investment Promotion, total arrears on these loans stood at US$220 million as of October 2024, with interest arrears amounting to US$83 million—constituting 61 percent of the principal arrears.
While the Treasury directed State-owned enterprises to establish dedicated sinking funds for debt servicing, only ZPC has implemented this strategy effectively. As of October 2024, ZPC held US$48.46 million in an escrow account for the Hwange 7 and 8 expansion projects, with no arrears reported.
The Hwange expansion, which added two units with a combined capacity of 600 megawatts, was commissioned in August 2023, significantly improving Zimbabwe’s power generation and grid stability. However, ZPC still faced US$37 million in arrears for the Kariba South expansion project, which has been hampered by low water levels in Lake Kariba due to climate change.
Airport and Telecom Arrears
The Airports Company of Zimbabwe had US$2.3 million in its escrow account for the RGM International Airport expansion, but it faces US$74 million in arrears for the Victoria Falls Airport project, including US$70 million in principal arrears.
NetOne, with only US$300,000 in its escrow account, has accumulated US$89 million in arrears, while TelOne’s total arrears stand at US$17.85 million.
Treasury’s Strategy and Mutapa Investment Fund
In response to the mounting debt, Treasury has mandated entities to ring-fence revenue from their operations to service debt obligations. However, analysts suggest that entities now managed under the Mutapa Investment Fund have the potential to turn around their financial fortunes.
“Given the challenges affecting these state-owned entities, Treasury has directed them to open dedicated sinking funds, but only ZPC has made significant progress,” the report stated.
The Mutapa Investment Fund is expected to reduce bureaucratic delays and insulate companies from ministerial interference, enhancing their ability to operate commercially and become profitable.
Broader Debt Challenges
Meanwhile, the Government is grappling with a looming US$738 million debt maturity in 2025, adding pressure to an already tight fiscal landscape. The Government is restructuring its US-dollar-denominated Treasury bonds to lower debt service payments to sustainable levels without compromising essential public services and economic growth.
As Zimbabwe navigates these fiscal challenges, analysts remain cautiously optimistic that reforms and effective management will enable State-owned entities to repay their debts and reduce reliance on Government support.
