You are here:Home>National Assembly Hansard>NATIONAL ASSEMBLY HANSARD 10 MAY 2018 VOL 44 NO 57

NATIONAL ASSEMBLY HANSARD 10 MAY 2018 VOL 44 NO 57

PARLIAMENT OF ZIMBABWE

Thursday, 10th May, 2018

The National Assembly met at a Quarter-past Two o’clock p.m.

PRAYERS

(THE ACTING SPEAKER in the Chair)

ANNOUNCEMENT BY THE ACTING SPEAKER

ERROR ON THE ORDER PAPER

THE ACTING SPEAKER (HON. MARUMAHOKO): I have to draw the attention the House to an omission on the Order Paper where two notices of motions by the Minister of Finance and Economic Development were not included.  The two notices of motions have been inserted in today’s Order Paper and will be considered as Order Number 1 and 2 respectively.

MINISTERIAL STATEMENT

THE ZIMBABWE AIRWAYS AND THE BEITBRIDGE-HARARE-CHIRUNDU ROAD

          THE MINISTER OF TRANSPORT AND INFRASTRUCTURAL DEVELOPMENT (HON. DR. GUMBO): Thank you Mr. Speaker. I wish to make a Ministerial Statement as has been requested by Hon. Members of Parliament through a request by Hon. Maridadi, on the Zimbabwe Airways issues and the Geiger International issue on the Beitbridge-Harare-Chirundu Road.

1.     Zimbabwe Airways (Pvt) Ltd

A.    Background

Mr. Speaker Sir, at its meeting on 20th October 2011, Cabinet constituted an Ad hoc Cabinet Committee to look into the revitalisation of Air Zimbabwe (Pvt) Ltd. This decision was occasioned by the fact that operation had been halted.  The Committee comprises of Ministers responsible for Transport, Communications and Infrastructural Development, Finance and Economic Development, State Enterprises and Parastatals, Tourism and Hospitality, Environment and Natural Resources Management and Industry and Commerce.

Mr. Speaker Sir, on the 28th of February 2012, the Committee presented its recommendations and the Cabinet, among others, made the following decisions;

                               i.            A new State owned company known as Zimbabwe Airways (Pvt) Ltd be formed;

                            ii.            that an Interim Board of Directors be established; compromising of Senior Government officials, to manage the Airline’s affairs pending appointment of a substantive board by the responsible Minister; and

                         iii.            an external/financial consultant be engaged to come up with a report bearing proposals on the business model and other issues pertinent to the successful turnaround of air Zimbabwe.

B. Implementation of Cabinet Decision

          Mr. Speaker Sir, in implementing the Cabinet decision the then Minister of Transport, Communication and Infrastructural Development, Hon. Goche:

       i.            established the new airline under the Companies Act [Chapter 24:03] which was registered as Zimbabwe Airways (Pvt) Ltd, registration number 3015/2012.  This name was adopted because during name searching at the company Registration Office, it was noted that the name Air Zimbabwe (Pvt) Ltd was already registered.  The new airline obtained an Air Service Act Number 13 of 2012 valid for the period April 2012 to April 2015.  The First directors of the company as per the requirements of the Companies Act were Mr. Andrew Bvume from the Ministry of Finance and Economic Development and Ms. Angeline Karonga from the then Ministry of Transport, Communications and Infrastructural Development.  The Secretary was Mr. Luckson Madzinga from the then Ministry of Transport, Communications and Infrastructural Development;

    ii.            established an interim board and the board was chaired by the then Permanent Secretary in the Ministry of Transport, Communications and Infrastructural Development, Mr. Patson Mbiriri.  Other Members of the Board were Permanent Secretaries in the Ministries of Finance and Economic Development, State Enterprises and Parastatals, Tourism and Hospitality, Environment and Natural Resources Management and Industry and Commerce; and

 iii.            authorised the engagement of Ernst and Young Zimbabwe on 14th May 2012.  The consultants’ terms of reference, among other things included developing business model for the new airline, validation of the assets and liabilities, identification of potential strategic partners and evaluating the best approach in establishing the new airline.

C. Findings by the Consultants

          The Consultants presented the Air Zimbabwe challenges which were mainly emanating from the following factors:

         i.            huge debt overhang which made the entity unattractive for strategic partnership.  The debt rose from unpaid creditors and interest on debt which accrued every month.  The debt then was sitting at US$282 million. Among the creditors were workers who were owed salaries and retrenchment packages;

      ii.            There was mismatch between the Airline’s fleet and its huge staff complement; and

   iii.            the airline possessed an old fleet that was expensive to operate, the new airline hence would only agree to render services to the new airline as a premium.

Following these recommendations, the Minister then shelved the operationalisation of the new airline while the Ministry engaged the Ministry of Finance and Economic Development on the debt issue.

          D. Resuscitation of Zimbabwe Airways (Pvt) Ltd

          Mr. Speaker Sir, between 2012 and 2017, the Ministry of Transport and Infrastructural Development sought authority from the Cabinet to seek for Strategic Partners for Air Zimbabwe (Pvt) Ltd.

          At its meeting on the 10th of March, 2015, Cabinet resolved that the Ministry of Transport and Infrastructural Development submit to it the following:

                   i.            a list of possible Strategic Technical Partners for Air Zimbabwe;

                ii.            strategy for engagement; and

             iii.            as proposed acceptable shareholding structure.

The Ministry was also tasked to benchmark the plan with international best practice, particularly with respect to the regional airlines that had undertaken similar projects.

Efforts to secure a strategic partner were hampered by two major issues, namely the debt situation which remained unresolved despite Cabinet approving its takeover and the non-availability of audited accounts in the airline since 2009.  Matters came to a head in 2016 when the management at the Air Zimbabwe then, sought to re-launch the Harare-London route without consulting the Ministry and the CAAZ submitted their application to the European Aviation Safety Agency (EASA).  During the same period that the management made the application to EASA, they had received the results of the IATA Operational Safety Audit (IOSA audit, which results were not positive.

The Government of Zimbabwe as the State party to the international Civil Aviation Authority Organisation (ICAO), the Civil Aviation Authority of Zimbabwe (CAAZ) as the aviation sector regulatory authority in Zimbabwe and Air Zimbabwe Limited as the national carrier and offending party, were summoned to appear before the European Union Air Safety Committee on 26th April, 2017 in Brussels, Belgium.

Subsequently, in May 2017, under references ARES (2017) 246318 Zimbabwe updated the community list of air carriers subject to an operating ban within the European Union in the framework of regulations (EC. Number 2111/2009), Air Zimbabwe was then banned from flying or over flying the European Union air space.

The Ministry, on behalf of the Government of Zimbabwe, being desirous to continue air space operations through a national carrier then resuscitated the operationalisation of Zimbabwe Airways Private Limited in July 2017.  The Ministry renewed the air service permit for Zimbabwe Airways and is valid until July 2020.

Purchase of aircraft

Mr. Speaker Sir, in October, 2016 Air Zimbabwe approached the State Procurement Board to seek authority for the purchase of four Boeing 777 second hand aircraft from Malaysia.  SPB approved Air Zimbabwe’s request in November, 2016.  Air Malaysia offered the Government the four aircraft for a purchase price of US$70 million in total.  The Zimbabwe Aviation Leasing Company was then informed to ensure that the aircraft would not be attached by creditors who were after Air Zimbabwe property.  To date, a payment of US$41 million has been made and the balance of US$29 million is outstanding.  Government has since received delivery of the first aircraft on 11 April, 2018.This covers the issue of Zimbabwe Airways and its history to-date.

Beitbridge-Harare-Chirundu Highway Project

Mr. Speaker Sir, the Government awarded ZimHighways the tender for the Beitbridge-Harare Highway in 2005.  In 2013, ZimHighways instituted legal proceedings against the Ministry of Transport and Infrastructural Development.  The process of which continued until the matter was withdrawn through negotiations done by the Minister of Finance and Economic Development on behalf of the Government.

Geiger International

The project was granted to Geiger International and China Harbour Engineering Company (CHEC) under Resolution PBR 1397E of 15th March, 2016 as one project.  CHEC was to be the main contractor of the project while financing 20% of the Beitbridge-Harare section of the road.

Subsequently, the two parties re-engaged the Government through the Ministry of Transport and Infrastructural Development indicating that the Beitbridge-Harare section was a Public Private Partnership, while the Harare Chirundu section was to be financed through a loan - hence the project should be formally split.  The request was submitted to the State Procurement Board which approved and reissued the project approval under PBR 1397F of 14 July, 2016.

The contract between Geiger International and the Ministry of Transport and Infrastructural Development was signed in November 2016 and to date the Government has not received any communication for the Financial Closure as required by the Engineering, Procurement and Construction (EPC) Contract.  In turn, the Ministry, through its letter dated 15th March, 2018, has served a notice as provided for by the Concession Contract and such notice period is for 60 days within which the concessionaire may remedy the event by giving rise to the right of termination within the remedy period.  Currently, the Government awaits a response from the concessionaire.

Mr. Speaker, this covers the request that was made for me to make a Ministerial Statement on those two projects by Hon. Maridadi on behalf of the Parliament of Zimbabwe.

HON. MARIDADI:  On a point of order, Mr. Speaker Sir.  We need clarification on a number of issues.  I wish to thank the Hon. Minister for those statements.  There are a number of issues, Hon. Minister, that I would like you to clarify pertaining to Zimbabwe Airways.  The Hon. Minister says in 2016 Air Zimbabwe approached Government wanting to buy airplanes and that they wanted to buy airplanes for $70 million from Malaysia. 

Mr. Speaker, it is not a secret that Air Zimbabwe is broke.  At the time that Air Zimbabwe approached Government wanting to buy aircrafts, I think they were in debt to the tune of about $500 million, some of which had been taken over by Government and housed at some vehicle which houses Government loans that are not performing.

Secondly, I would like the Minister to tell us, because he says Zimbabwe Airways was given a licence because Air Zimbabwe could not fly into Europe.  Had Air Zimbabwe flown into Europe, the aircraft would have been seized by people that they owe money.  I wish to know the shareholding structure of Zimbabwe Airways, who owns it and where did you get the US$41 million to buy the aircraft and where are you going to get the balance of US$29 million?  I also wish to understand the role that is being played by Bona’s husband, because when the aircrafts were delivered to Harare, we saw on the pictures that came out in the press Bona’s husband wearing a pilots uniform with four strips which indicate that he is a captain and yet the information that we have is that when he left Air Zimbabwe he was a first officer.  Did he fly the aircraft to Harare, what role does he play and I want you to tell us if he has resigned from Air Zimbabwe and if he has been given a job at Zimbabwe Airways?  That is the first batch of questions that I would like you to respond to and I will come back with some more.  Thank you.

HON. DR. GUMBO:  Thank you Mr. Speaker Sir, it is true that Zimbabwe Airways or Air Zimbabwe, when we engaged to buy the aeroplanes on behalf of the Zimbabwe Government we started the negotiations under the name of Air Zimbabwe, but it then so happened with the background information that I gave and unfortunately Hon. Maridadi was not in the House then, the four planes are bought for Air Zimbabwe by the Zimbabwe Government.  The shareholder is wholly Government of Zimbabwe and there is no other shareholder.  It is the Government of Zimbabwe, so there is no issue. The four planes were bought for Air Zimbabwe by the Zimbabwe Government. The shareholder is wholly Government of Zimbabwe and no other. So, there is no issue about that one.

It is not correct that the debt for Air Zimbabwe has ever risen to $500 million, it is not true. It is only $320 million, so it is not correct what the Hon. Member has said. I do not know where he got that from. It is true that when operations for Air Zimbabwe halted it was because the planes for Air Zimbabwe were under threat of being impounded and stayed in London for a day or so. This is the reason why we could not fly back to London. Government, in its own wisdom, came up with change of a name to operate under Zimbabwe Airways and that I have already explained with the procurement procedures being properly followed according to the laws of the country.

Simba Chikore was employed by Air Zimbabwe. He has very good qualifications which I have stated before and it will not be very fair for me to keep on talking about an individual but as it is and it concerns the Hon. Member, I am stating here again that Simba Chikore was properly trained in aviation in America. He flew in America for over five years and when he came to Zimbabwe he was one of the senior pilots at Air Zimbabwe here in Harare until at such a time when we had problems with our own aircrafts and so, he left to go and join Qatar as senior pilot and instructor at Qatar.

That Simba Chikore, if that is what worries everybody else that he is a son-in-law of Robert Gabriel Mugabe does not stop him to be an individual, to have his own qualifications and also apply for a job. He has got a life and family to live, and I wish as Members of Parliament we can understand that. There is nothing wrong about Simba Chikore. He was properly employed by Air Zimbabwe as COO, properly interviewed, excelled and given the job. He was one of our lead persons appointed by me as the responsible Minister, to lead the team that left Zimbabwe to negotiate for the purchase of these planes because of his knowledge and we left Ripton Muzenda to run Air Zimbabwe when we assigned him that job.

When we realised that there was a threat of again impounding the Zimbabwe aeroplanes that were bought in Malaysia when we flew one of them, that is when we said Simba Chikore and four others must now be assigned and leave the offices of Air Zimbabwe to operate separately. Totally nothing wrong about that, just operative. I wish Members of Parliament like me can just concentrate on the issues surrounding Zimbabwe Airways and not the individual. He has got a life to live and I want us to believe that. Anybody else can be traced to be a relative of everybody here and they cannot be stopped from being given a job. That should not be the issue.

There was an issue about the $41 million. I have stated that Government paid $41 million of the $70 million and there is a balance of $29 million which needs to be paid. Just today, I requested the Minister of Finance to assist us to pay that $29 million so that we can have the other two planes which have not been paid for. The other two of the four planes have already been paid for. The other is going to be delivered in the next two weeks but we have a balance of $29 million which needs to be paid for the other two so that they can be delivered. It is a Government project which is not dirty. It is clean and there were reasons why it was kept under wrap. It was just because we wanted to avoid the issue of them being impounded because if they had been exposed as Government of Zimbabwe planes, they would have been taken by the creditors who were claiming for money; the farmers in Mashonaland Central and some from Manicaland which amount of money was really not easy for the Government of Zimbabwe to pay.

Now because of the re-engagement, we have been advised that it is an issue that has already been resolved because the Minister of Finance has now agreed on a process to pay those farmers their money from September. So, now the cat is outside the bag and I do not know why it becomes a case like we are hiding anything else and the reason for hiding, we have told you. I think in all honesty Mr. Speaker Sir, we should be applauded for doing that. Thank you.

HON. NDUNA: Mr. Speaker, I just have a few questions for clarity. What is the capacity of the outstanding aircrafts? We know we have a Boeing 777 or Boeing 707. The second one is the need to know the specialty of one Karonga. I know after the change of the department for Civil Aviation Authority, she is also on the board or in the company of Civil Aviation Authority of Zimbabwe – [HON. DR. J.M. GUMBO: She is what?] – She is also either one of the board members. So, I seek to know the specialty of one Karonga. Why I say so Mr. Speaker, you have got a Bill that is before you, the Civil Aviation Authority Bill that is unbundling and she is also one of those people that are registered as the company owners of that company.

The third one, I would want on a footnote on the Air Zimbabwe to know from the Minister why it was not prudent seeing this debt was attached to Air Zimbabwe, to just transfer the people from Air Zimbabwe to this company. Also, what is happening to the CEO and the COO appointments of Air Zimbabwe, whether that is going to come in or it has died a natural death because they are currently on auto-pilot without a CEO and COO?

*HON. MUNENGAMI: My question to the Minister is that they has said he bought aeroplanes to run away from debts, which debts he has said are now being taken care of now. Since these debts are now being paid, is the name of the company and the directors going to change so that it goes back to Air Zimbabwe since the reason why they were hiding has been corrected.

In Malaysia, we know the types of aeroplanes that are made there and that they are not of good repute. One of the planes from Malaysia has not yet been found up to now and we do not know if it is under the ocean. Malaysian planes have a history of killing their passengers. The world-over no one is interested in buying Malaysian planes. What was the thinking behind the purchase of these planes at the same time endangering the lives of Zimbabweans? All parliamentarians are now afraid of using Air Zimbabwe planes because the planes that were bought are suspicious.  What guarantee is there that the Malaysian planes are not the ones that are renowned the world-over for not being good aeroplanes.  That is my question.  Thank you Hon. Speaker.

          HON. MARIDADI:  Thank you Mr. Speaker.  As a matter of fact, the four aircrafts that Zimbabwe has bought were actually decommissioned by the Malaysian Government following the accident involving three aircrafts from Malaysia.  That is the reason why those aircrafts were decommissioned from the Malaysian fleet.  So, that is a fact and it is in the public domain, it is known and the Minister knows it as well as I do.  They were decommissioned following accidents.

          Secondly, it is important to know the individuals behind the company because the company does not run itself.  The reason I was asking about Simba Chikore is, because we want to know the background of people who are running an organisation.

Another issue is that the aircrafts that have been bought have not taken to the skies-yes, they have not started flying and they are parked there; they are gobbling money in insurance.  They are not making any profit for Zimbabwe Airways or for the Zimbabwean Government.

          Another issue Mr. Speaker is that Air Zimbabwe has retrenched people ever since I think 2005 and the people have not been paid their dues. We know that there are people, I think about 170 workers who have been arrested for picketing at the airport because they are said to be a public nuisance.  Those are people some of whom have worked for Air Zimbabwe for 28 years or 30 years and they have not been given their terminal benefits.

          The last one Mr. Speaker is, why the Zimbabwe Airways attracted a lot of interest is because initially when that deal was consummated, Government said there was a group of Zimbabweans in the diaspora who had come together and wanted to help the Zimbabwean Government. It was that group of people in the diaspora who had bought the aircrafts.  So, what the Minister is telling us now is a change that it is the Zimbabwean Government because initially we were told that it was a group of good Zimbabweans in the diaspora who wanted to buy aircrafts and the Zimbabwean Government was facilitating but now we hear that it is the Zimbabwean Government which has bought the aircrafts.  But, even if it was the Zimbabwean Government, I want the Minister to give me an understanding of why it was such priority to buy aircrafts and then put them into Air Zimbabwe knowing very well that the capacity to run an airline is not resident at Air Zimbabwe. 

There is no one with capacity and the facts speak for themselves.  Air Zimbabwe has been bailed out by Treasury, Hon. Chinamasa is here – they have been given $250 million and I think that it was in 2010 that they were given I think $200 million and six months later, they were in debt.  The reason they cannot pay salaries regularly is because they are in debt.  I do not know what inspired the Minister to want to buy aircraft for an organisation which is perennially unable to run its affairs.

          HON. ZINDI:  Thank you Hon. Speaker.  Perhaps, it may sound like a repetition but sometimes repetition is emphasis and also to clear the fears that the public have.  I must explain myself so that you will understand and allow me to express myself.

          What I am saying is, could the Minister further explain so then we understand the reasons exactly why this Zimbabwe Airways had to be created secretly without having to come and explain to Parliament the reasons behind the creation or the establishment of that airways.  It is even confusing me because you cannot tell the difference between Air Zimbabwe and the Zimbabwe Airways.  So, having established a new company in order to make sure that they run away from the debt incurred by Air Zimbabwe, was it not prudent to come and inform Parliament in order to allay the fears that the public do have or suspicion that the public has other than having to be asked by Parliament to come and explain.  Was it not prudent?

          Further to that, I hear reading through the print media that one of the aircrafts or all of them are here, is actually number plated as RGM and whatever other numbers.  Could the Minister clarify that?

          THE ACTING SPEAKER:  Order Hon. Member, a question was raised and the Minister stood up and answered that in this House.

          HON. ZINDI:  Okay, I withdraw on that one but the first one still stands.  Thank you Hon. Speaker.

          THE MINISTER OF TRANSPORT AND INFRASTRUCTURAL DEVELOPMENT (HON. DR. J. M. GUMBO): Mr. Speaker Sir, the first questions were by Hon. Nduna about how many.   Maybe, he was not here.  I stated that the Government of Zimbabwe was buying four aeroplanes - 777 ER.  That is the size of the plane.  I do not think he was here when I stated that but that is the question – [AN HON. MEMBER: What is ER.] – Extended Range, that means it flies 22 hours before it can refill.

          He wanted also to know about Karonga and what is special about her.  She is a legal officer in the Ministry of Transport and Infrastructural Development and those are the people that we use. There is nothing really special about her.  She is just a special person because she works and she is not a board member for CAAZ for your own information. 

Then, you wanted to know about COO Simba Chikore and others.  Simba Chikore, I have already and maybe the Hon. Member was not here -  Simba Chikore is Chief Operations Officer of the Zimbabwe Airways.  He was the lead person in the negotiations with four others from the Air Zimbabwe side, we also had people from CAAZ and people from the Ministry itself.  So, it just so happened that the operations for planes are under that section which Air Zimbabwe or Zimbabwe Airways, that the name of Simba Chikore keeps on recurring by the unfortunate thing that he was employed by Air Zimbabwe.  If that is being unfortunate at all – [HON. NDUNA: Inaudible interjection.] –

          THE ACTING SPEAKER:  Order Hon. Nduna, I am not going to give you that chance.  Can you sit down then if you have a further question, I will allow you to do that.  Just take your seat.

          *HON. DR. GUMBO:  Mr. Speaker Sir, Hon. Munengami is saying that Malaysian planes have a bad reputation.  Aeroplanes are made by Boeing and the people who allow people to buy airplanes are the ones that made them.

 I do not know Hon. Speaker, that since I bought a Mercedes Benz, if I am involved in an accident then they should not be bought because they kill people.  There has never been any aeroplane that has not been involved in a crash.  What I read and what I remember in this country was because there were wars, one aeroplane was shot down and the other one has not been found.  That same interpretation should not be applied to everything.  There are several Boeing 777 that are flying the world over – [AN HON. MEMBER:  Inaudible interjection.] -  I have difficulties in trying to answer in a satisfactory manner because I do not want to look down upon people who make contributions.  I respect you and in that regard, please respect me as well.  Thank you.

Hon. Maridadi came back and said the planes were decommissioned.  The planes had never been decommissioned.  It is not true that the planes were decommissioned. Hon. Maridadi, if you want to be educated on that, come and I will walk you through the issue. Malaysia sold its planes because it was superstitious and they had many other types of planes that they decided to dispose those ones. We do not want to lie to each other and I respect you Hon. Maridadi.

          Mr. Speaker Sir, I do not know whether I should continue to repeat this because I have already said the shareholder and owner of Zimbabwe Airways is the Government of Zimbabwe. All else you are talking about are workers and there are no other shareholders for Zimbabwe Airways save the Government of Zimbabwe.

          On retrenchment, Hon. Maridadi knows pretty well that during the hyper-inflationary period in Zimbabwe, we had bearer’s cheques and Air Zimbabwe did not operate for two years. They did not operate and what they did not do which I agree with you is that they did not resolve the issue of workers. They maintained all their workers on payroll and when the economy started to stabilise they came back to say we now want our money. There is a plan to pay them but the problem arising is how much we should compensate each of them for the Zimbabwe dollar tenure they were not working and that is where the problem is. On those who were retrenched, we addressed that issue when I got in office and we have continued to pay them from the little that we have been making and summarily we are taking care of that. However, the majority of people who were retrenched or who had not been at work during that period Air Zimbabwe was not operating are the ones with the issue that we must attend to. It is not the issue of the workers, I agree and it is the issue of us the management who did not address issues properly at that particular time which is where the discrepancy is.

Hon. Maridadi, I had explained and I agree with you but there is a reason we did not come out clear. If you remember well when we went to Malaysia to purchase the planes, I did not go there with the objective of resuscitating Air Zimbabwe but to buy aircraft from Malaysia and that is what I said. After making that agreement and as I explained whilst you were not yet in I think, what then happened is that when we had the flight-test for the first plane and landed in Malaysia after having flown for two hours and then got news that these planes would not leave Malaysia, they had to be impounded. We then got advice that to make sure that the planes would not be impounded, we had to cancel off the agreement that we had entered into as Air Zimbabwe and come up with another name. That is when we revisited the paper work and used the Government registered company namely Zimbabwe Airways in order to circumvent this problem. That is how we did it and whether we were foolish in doing so, I cannot say but we thought we were clever enough to secure and safeguard your money because part of the cost was already paid under Air Zimbabwe. We changed everything and that is why the State Procurement Board were saying we must also change the papers and put it under Air Zimbabwe which we said until these things are resolved, we will continue with that at the back of our mind. That is why we did that Hon. Maridadi in-order to make sure that we protected ourselves. That is when we also came up with the story that the diasporans were buying the aircraft. That is why I said we now have to explain exactly why we did that. It was only to save our situation otherwise we could have lost the money as the country and Government.

          Hon. Zindi, on why we did not come to Parliament for approval; when you and I were in Parliament, this company was already formed. Zimbabwe Airways was formed by Government in 2009 for the reasons I have stated and that was to revitalise or do away with Air Zimbabwe then and although I must take responsibility, I was not there then when the company was formed. For us it is a matter of taking the company from the shelf because it is already there as a Government company and we did not want to form another company because Government already had another one. Well, I still have to respect you Hon. Zindi and answer again why RGM and those other names were on the planes. It was out of excitement then, when there was President Robert Gabriel Mugabe, Vice President Emerson Dambudzo Mnangagwa and Vice President Phelekezela Mphoko. This was not done by me but because these guys name their planes Mosi-a-Tunya, Mbuya Nehanda and so on, instead of doing that, my staff put on the belly of one plane RGM, another one EDM and the other one RPM and I am going to rub all those things because they are causing confusion. Yes they are causing confusion to many people. It is not the registration numbers of the planes but I think my staff was excited and they put the names of the president and his two vice presidents. I can take responsibility of the mistake that was done by my staff but I think it was out of excitement and may be a very silly excitement. I am going to remove that. 

          THE ACTING SPEAKER: Order, I think we have exhausted this. Vehicle AEQ2090 is blocking other vehicles and may the owner please go and remove the vehicle.

MOTION

RATIFICATION OF THE LOAN AGREEMENT FOR SMALLHOLDER IRRIGATION REVITALISATION PROJECT

          THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA): Mr. Speaker Sir, I rise to move a resolution that this House approves the loan agreement between the Government of the Republic of Zimbabwe and OPEC Fund for International Development which was signed on 8th March 2018 amounting to US$15 million and the purpose of the loan is to co-finance the smallholder irrigation revitalisation project. The loan facility Mr. Speaker Sir has a tenure of two years inclusive of a five year grace period and will attract an interest rate of 2.5% per annum inclusive of 1% administration charges. Mr. Speaker Sir, the goal of the project is to reduce rural poverty by helping households in the targeted areas in-order to achieve food and nutrition security and to ensure community resiliency to adverse climate change effects.

          The objective will be achieved through implementation of the following:

·       Rehabilitation and development of irrigation infrastructure of 6 100 hectares;

·       Provision of technical assistance and conduct of feasibility studies for possible expansion of existing schemes by 2000 hectares;

·       Rehabilitation of over 100km of farm roads and construction of small bridges;

·       Construction of a multi-purpose post harvest management centre;

·       Procurement and installation of equipment;

·       Enhancement of institutional capacity strengthening by AGRITEX, Department of Irrigation and targeted farmers’ organisations.

Mr. Speaker Sir, the project will directly benefit 15 000 households in existing irrigation schemes and 12 500 households in adjacent rain-fed areas covering a total of 8 000 hectares. Further, Mr. Speaker Sir, employment opportunities for about 2000 youths, will be created…

          Hon. Members having been conversing at the top of their voices.

          THE ACTING SPEAKER: Order Hon. Members.  Let us hear the Minister in silence please.

          HON. CHINAMASA: And training of 500 extension and technical service providers.  The project will support sustainable development in Masvingo, Manicaland, Midlands and Matebeleland South provinces.  Mr. Speaker Sir, the total project cost of this project revitalisation is US$51.68 million.  The OFID loan facility of US$15 million is over and above $25.5 million grant, which was availed by the International Fund for Agricultural Development (IFAD) in November, 2016.

          The Government of Zimbabwe and beneficiaries will contribute $7.9 million and $3.28 million respectively towards the project.  The $15 million is therefore a top up to meet the project cost of $51.68 million. 

Mr. Speaker Sir, on project implementation; the project will be implemented over a period of seven years and preparatory works commenced in July, last year with the support from IFAD.  The Ministry of Lands, Agriculture and Rural Resettlement is the executing agent responsible for the implementation of the project. 

          In order to ensure smooth implementation of the project, a project coordinating unit was established under the Ministry of Lands, Agriculture and Rural Resettlement to oversee day-to-day operations of the project.  I therefore, commend this loan agreement for the small holder irrigation revitalisation project, in the sum of US$15 million for the approval of this august House.  I have appended the details or the main features of the loan facility, which I have already outlined in my address.  I thank you Mr. Speaker Sir.

          HON. GABBUZA: Thank you Mr. Speaker. I do not think there is any reasonable person who would not want to support a loan agreement that support agricultural productivity.  Perhaps what I think is important is within the document because I have not seen it; it would be of interest to every Member of Parliament to know the exact schemes that are being supported. 

The Minister mentioned regions, fair and fine, but I think it is also important to know specifically which schemes in Matebeleland are going to be supported and how much money is going to be spent for each scheme.  This is because the challenge that we normally have is a situation where one scheme over-benefits if there is no specific budget, at the expense of another scheme.  I think such funds must be specifically targeted to each scheme to say how much money and what is the scope of work that is going to be done.  It also helps us as legislators, to do our oversight role, so that we specifically know what project work is going to be implemented in a specific scheme.

I also wish to know from the Minister, it is not the first time we have heard about OPEC Fund, which other projects in the Government of Zimbabwe are being supported by OPEC Fund or is it the same OPEC Fund that we have heard before or perhaps there was a delay in implementation?  I cannot specifically remember, but if the Minister could just refresh our memories. 

Lastly Mr. Speaker, when we get such fresh monies from our friends, I think it is the time when we must capacitate our local companies and infrastructural developers. In terms of the implementation of this programme, how do we benefit as local companies?  There is talk of rehabilitating access roads to the farms or to the irrigation schemes, is there a clause within that loan agreement that enables the local companies to be contracted to provide services?  This is because we have witnessed in the past where we get a loan fund and the funders chase up the loan again and provide services and in the end as a country, we get money but the money goes back to the loan providers.  I am sure we should take advantage of such.  I wish to hear from the Minister if they had taken into consideration such concerns especially from our local contractors to ensure that they benefit locally.

HON. CHASI: Thank you Mr. Speaker Sir.  I rise to support the approval of this loan agreement.  I think that it is a very important part of our farming activities in the country and the choice of the areas where this loan is going to be applied to is also very important; Matebeleland South and the related areas that are mentioned in this agreement are some of the areas that are food and water insecure.  I think that Government must be commended for taking this posture and concluding this agreement. 

However, I also would like to say that we need to develop further water resources in these areas where this loan is going to be applied and one hopes that we will continue to make progress on the Zambezi Water Project which will have immense downstream effects in improving the lives of people in Matebeleland and in Bulawayo.  I am hopeful that the Government is not stopping here but also looks at other areas in the country like Dande, which are completely arid and people live in very difficult situations there, very similar in areas in Matebeleland South and others.  I cannot say more than this, I will just add to what the previous speaker has said and to commend and congratulate Government for concluding this agreement.  I also hope that those who are required to make payments will be able to operate the schemes productively and manage them very seriously in order to ensure that repayments are made so that Government does not lose its investment.  I thank you.

HON. NDUNA: Thank you Mr. Speaker Sir.  I want to applaud the Minister for bringing to the House the loan agreement.  I want to support  the approval of this loan agreement.  Mr. Speaker Sir, in so many ways, I also urge those that would have been given that facility, seeing it is a loan, to own up and pay back.  I say this, Mr. Speaker, as one of your delegates in the ACPEU Joint Parliamentary Session, where I was in Brussels about a month or so ago.  There came up operatives from European Infrastructure Bank (EIB) who, by some reason, have stopped lending to Zimbabwe and the private sector in Zimbabwe in terms of infrastructure development, because of non repayment of those loans.  So, I urge those that are going to be beneficiaries of this loan to make sure that they own up so that we are not black listed as a country in terms of getting loans, because this is not a grant.

Mr. Speaker Sir, I am also alive to the commissioning of the drilling rigs that go up to one thousand meters by His Excellency the President Cde. Mnangagwa recently, and I ask that this loan augments and complements the efforts of the agrarian revolution and the water reticulation to provide portable safe drinking water and for irrigation purposes.  I also urge the Minister to also take cognisance of the ubiquitous or the copious amount of water in Chegutu.  There is about seven perennial water bodies that do not run dry – Mufure river, Backseal and John Bhinya, Suri Suri dam and Suri Suri river just to mention a few, so that money can be employed; we can put our money where our mouth is and then we can resuscitate.

You have seen what one Bright Matonga has done on the highway.  Everyone that passes through Chegutu can see that the citrus there are now in a sorry sight, dilapidated and deplorable state. We would like to resuscitate such income generating initiatives so that our country can now have economic development second to none in the agrarian sector.

Mr. Speaker Sir, as I say this, I am also alive to the Brazilian initiative for more food for Africa as we also couple this loan with that equipment that is coming through so that we can effectively and efficiently conduct our business in the agrarian reform programme.

Mr. Speaker Sir, I want to thank you for giving me this opportunity to ventilate some very key issues relating to this loan.  I thank you. 

THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA):  I want to thank the Hon. Members Gabbuza, Chasi and Nduna who have contributed to this debate in support of the loan agreement.  Let me just highlight in response to some of the issues which have been raised. 

Hon. Gabbuza asked which exact schemes.  Unfortunately, I do not have the schemes here.  The loan agreement does not contain the schemes.  I will ask my colleague the Minister of Lands, Agriculture and Rural Resettlement to do a Ministerial Statement where he can outline all the small holder schemes which are going to benefit under the US$51.68 million, because the project cost is US$51.68 million and is being co-financed by IFAD based in Rome, OPEC and also partly by us as Government.   So, I will ask him to make a Ministerial Statement so that he can elaborate where the money is going to go.

You do not need to worry about usage of loan money, because the lenders themselves provide more oversight than our capacity.  They want to know where every dollar has gone otherwise, it jeopardises future applications for loans.  So, generally in terms of oversight, the oversight will be provided by the creditor institutions. 

With respect to whether there will be local participation which is a question raised by Hon. Gabbuza, these projects are 100% local participation.  OFID will only provide the cash and they will obviously want to know where the cash is going, but with respect to who is rehabilitating, who is constructing, those will be entirely 100% local contractors.  So there is again no problem about the money going to intended purposes because as I have said, generally, the creditor institution, from time to time, will send audit teams to ensure that money is being disbursed in the desired manner.  If the audit establishes that there has been misappropriation, that will stop the disbursements straight away.

Hon. Chasi, thank you very much for supporting this loan.  Let me just say that when you talk about Dande and Kanyemba, we are talking now of big money and big projects.  It is actually Kanyemba and Dande with a view to taking advantage of the vast land opportunities along the Zambezi valley and also the availability of water along the Zambezi valley.  These are matters where when we interact with financial institutions, these are issues we put on the table.  For instance, His Excellency visited Qatar not long ago and the Qatarees are interested in agriculture, in particular cotton and also horticulture.  So when we talk to them we refer to areas like Dande for development of the cotton industry and in fact, we discussed Dande, Muzarabani and so on.  I hope that sooner rather than later, there will be takers in the investment fraternity to help us to develop these areas.  This will involve opening up entirely areas which have never been put to agriculture before.

Hon. Nduna, I again thank you very much for the support.  The issue you raise is almost national, that we must develop our water bodies, but the priority that Treasury is placing on this issue is first to link the 10 000 or so storage dams which we currently have of different sizes to the field edge of the farm before we even consider developing new storage facilities.  So, we need to link up and the water bodies which have been mentioned by Hon. Nduna are such which we will need to mobilise resources in order to link up that water to the field edge of the farm.

Mr. Speaker Sir, I want to thank the Hon. Members once again for the support for this loan and I move that the loan agreement be approved.  I thank you.

THE ACTING SPEAKER:  Hon. Gabbuza had raised an observation that Hon. Members did not receive the documents.  I am informed these were placed in your pigeon holes on Tuesday.  So, if you could go back and look into your pigeon holes.

Motion put and agreed to.

MINISTERIAL STATEMENT

 

DEVELOPMENT AND UPGRADING OF THE ROBERT MUGABE INTERNATIONAL AIRPORT PROJECT

          THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA): Mr. Speaker Sir, after the successful completion of the Victoria Falls International Airport, the Civil Aviation Authority of Zimbabwe (CAAZ) went on to develop their next project which is the Robert Gabriel Mugabe International Airport. The project entails the upgrading and rehabilitation of land side and air side that includes the terminal building and runaway.

          The project is earmarked to cost US$153 million. A loan has been secured from Export-Import Bank of China (China Exim Bank) amounting to RMBI 1.045 billion (approximately US$153 million).

          Project Financing and Loan Repayment

          Mr. Speaker Sir, on 4 April, 2018 the Government of Zimbabwe and China Exim Bank signed a Concessional Loan Agreement amounting to RMBI 1.045 billion for the development and upgrading of the Robert Gabriel Mugabe International Airport which is 100% of the total resources required for the project.

          The RMBI 1.045 billion facility has the following terms: -

                   Interest rate                                               2 % per annum

                   Grace period                                             7 years

                   Tenure (including grace period)             20 years

                   Management fees                                      0,25%                          

                   Commitment fees                                     0,25%

          Pursuant to signature of the loan agreement, an on-lending agreement will be signed between the Government of Zimbabwe and CAAZ with the above terms.

          Mr. Speaker Sir, the proceeds collected from Air Infrastructure Development Fund and passenger services charges will be ring-fenced into an Escrow Account that will be jointly monitored by Government and China Exim Bank. The interest payment will be the first charge, with the balance left for CAAZ to carry out its activities. The interest repayment will be based on the Loan amount drawn down.

          Expected Benefits

          Mr. Speaker Sir, the project is expected to yield the following results: -

·       Increased passenger and aircraft processing areas through the expansion of the international terminal building;

·       Improved passenger processing through introduction of state of the art passenger processing and facilitation equipment and systems;

·       Runway safety assurance through completion of the runway rehabilitation and airfield ground lighting project;

·       Expected increased traffic at the airport as evidenced by traffic growth at Victoria Falls International Airport after completion of the development project;

·       Developing the R.G. Mugabe International Airport into a regional hub;

·       Enhancement of economic growth, due to expected increase in passenger, aircraft and cargo traffic through the airport; and

·       Employment creation during the construction and operations through the expanded airport infrastructure, as already witnessed in Victoria Falls.

For these and other reasons, I commend the loan agreement

between the Government of Zimbabwe and China Exim Bank for approval by this august House.

          HON. MARIDADI: My first reaction is that this Government is borrowing and we are really borrowing, but this particular loan here is a good facility. If you look at the tenure, interest rate, grace period and so forth, it is a fantastic facility. What I would like to say to the Hon. Minister is that look at the way China looks after its interests. The way China then comes back to say this is how we are going to get our money. They get into an agreement where they know the Zimbabwean Government is not able to default on repayment. They ring fence income and that income is put into an Escrow Account and it goes straight to the Chinese bank.

This is what we expect a Government to do, unfortunately our Government is very bad at negotiating deals and yet when you negotiate with other nations like China, they show you how it is done. I can guarantee you Mr. Speaker that when China Exim Bank came to sign this facility, they probably had 8 or 9 people coming from China; legal experts, accountants and economists appending their signatures. It will not surprise me that from the Zimbabwean side there was probably only the Minister negotiating the loan and we saw that with ESSAR.

On the ASSAR Agreement Mr. Speaker, ESSAR had five signatures on the agreement and for Zimbabwe; there was only the signature of the Minister of Industry and Commerce. Then you wonder how do we do that as a Government? Look at how this whole loan is structured Minister and copy from the Chinese. Do not just borrow their money but copy from the way they do business. I support this entirely and hope that this money goes to the construction of the airport, because our airports, in other countries like South Africa, it will be an aerodrome. It is smaller than even King Chaka in Durban.

We need to have a good airport because if five aeroplanes land at the same time at Harare International Airport, there is no capacity to process 500 passengers who have been dropped at the same time. You go to OR Tambo, every two minutes there is an aircraft taking off or landing and we do not have that capacity and yet in 1995, we were far better than South Africa and Minister, learn from other nations.  This is a fantastic loan facility and I like the way that it is structured – it shows that the Chinese are smart, be smart Minister.  Thank you.

          HON. NDUNA:  I will be very brief Mr. Speaker and there is a reason why.  Mr. Speaker.

          THE ACTING SPEAKER:  Very unusual of you – [Laughter.] -

          HON. NDUNA: Thank you Mr. Speaker.  I just want to thank the Minister and I am agreeable to the approval of this loan.  Mr. Speaker, there is what is called ‘ten-key project’ in terms of engineering aptitude.  We saw that in Victoria Falls Mr. Speaker, where the Chinese bring in lock, stock and barrel; the bolts and nuts and including the cement that was being bought from outside because we could not zerolate. We could not remove taxes on our cement locally but we were giving tax certificates for importation of those raw materials.  Mr. Speaker Sir, I want the Minister to take a cue from that project so that this one does not become a ten-key project.  If it does Mr. Speaker, we have 80% of any raw material in terms of civil engineering construction in Zimbabwe.  Let all those raw materials be bought from here.  This is my clarion call.

          Mr. Speaker, the issue of the runway markings as the Hon. Member has said, it is quite deplorable and dilapidated at the Robert Gabriel Mugabe International Airport.  If this can be expeditiously implemented and even before any other things which are administrative, we could certainly see resumption and revamping of that airport to be second to none.

I am quite aware of what we should be doing in terms of radars and equipment.  We are just dealing with simulation currently. We need to expeditiously install radar systems and I am quite alive to the fact that this loan comes with the radar systems and everything.  If we can throw down everything and make sure we approve this loan and we certainly put in place air services that are second to none.  Aware that he has spoken of the passenger service fees to repay back and the service fees to repay back, this can only come about Mr. Speaker, if we get over-flights and we can monitor over-flights over our airspace; only if we have radar systems that are effectively in place.  Mr. Speaker Sir, I want to thank you and I want to thank the Minister for this loan agreement and I call for the approval.

          HON. CHASI:  Thank you.   I also rise Mr. Speaker, to support once again this loan that Government has entered into.  I think it clearly demonstrates the dove-tailing of Government policy – the purchase of aeroplanes that require a bigger airport.  I also think that Government has reflected very good negotiation skills given the terms that we have been given and I think it is an excellent loan.  I think that our airports are the gateway into Zimbabwe and they really ought to reflect what we represent as a country.  We are already beginning to see the increased inflows of people who are visiting our country for purposes of conducting business given the new dispensation. 

So, I want to congratulate the Minister and also say that with the bigger airport, we do need to modernise it in almost every respect to ensure that the belts that bring out the luggage are working properly and efficiently.  Sometimes visitors take a long time to receive their bags and that type of thing and also to ensure that technology-wise, there is free Wifi there and when people arrive, they are easily connected to those they need to communicate with.  So like the previous speakers, I want to applaud Government for entering into this loan agreement and I support its approval.  I thank you very much. 

THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA):  Mr. Speaker Sir, I want to thank once again Hon. Members Maridadi, Nduna and Chasi for their contributions in support of the loan agreement.  Let me just respond to the specific issues that were raised.

Hon. Maridadi, you seem to suggest that we do not borrow wisely.  It is not true. As Government, some of the challenges that we are facing are historical legacy debts.  As far as my leadership of the Ministry has been concerned, since I came in, we have been borrowing only for infrastructure – Kariba South and now Hwange 7 and 8 and expansion of the Robert Mugabe International Airport and many more infrastructure projects.  When we do, we always ensure that there is a cashflow that will result after the completion of the project to service the loan because to service these loans, we cannot do it from the budget.  The budget has no capacity.  So, generally all the loans that we are concluding have a cash flow projection and therefore we have no hesitation where the cash flow is from to enter into any loan agreements.  This is the position that in fact we have taken with respect to this loan.

Of course, you say that they are smart.  Where the Chinese are smart is that they do not lend you their money and use it on other people.  They will always insist on Chinese contractors and it is actually ‘take it or leave it’ on that basis.  That is where I think they are smart.  With respect to how many signatures are on the agreement and so on, that is immaterial.  For your information, this loan agreement was only one - my signature and that of China Eximbank.  There were not many signatures.  When you say Essar had many signatures, I do not know.

As a matter of fact, in terms of negotiations, I think the skills are there.  We do employ both internally and externally where we think that there is no internal capacity to negotiate on any key aspects.  For instance, when we are talking about airports, you need someone who is conversant with airports and so on, both in terms of designs and also in terms of cost, quantity bill or bill of quantities.  You need someone who is conversant otherwise you can be taken to the cleaners.

Hon. Nduna, thank you very much for your support and I think you comprehend fully what this project entails, that it will bring with it new systems and so on.  But, you raised the issue about local participation.  Clearly, there will be focal participation and much of the redoing of the runway, I think it is all concrete; I may be misled.  It is all concrete and steel also, but steel maybe imported.  But, when you are talking about concrete, sand and cement, all those are sourced locally.  So to that extent, there will be local participation in the expansion of the airport.

Hon. Chasi, thank you very much for bringing out the link between the expansion of the airport and the issue which took quite some time here where Minister Gumbo was defending the purchase of bigger aircrafts.  We are going in the direction where we want to restore Zimbabwe and Harare in particular, to be a regional hub and to that purpose, you need an expanded airport to anticipate increased arrivals or passenger arrivals. 

You also need ,and I am sure at some point the Hon. Gumbo will also tell you that in order to bring the necessary traffic in the hub, we need smaller aeroplanes, which is why alongside the purchase of the bigger aircraft, there was also a plan to buy smaller aeroplanes to bring the necessary traffic into the hub from the regional places.  It could be Lusaka, it could be Angola, it could be DRC, Namibia, Botswana  and so on and I know that as part of the package of the four planes that the Minister is buying from Malaysia, we have already bought one smaller Embraer but we need them to be six in order to complete the project. Hence sometimes when people ask the question - why is the aircraft still idle, the answer is, it has to be a complete package. A complete package entails those four airplanes which you cannot use to fly from here to Mutare or Bulawayo but need long overall routes. For that to be possible, we need passengers to be brought to the hub for the larger aircraft to carry those passengers to far-away places. That is the plan Mr. Speaker Sir and I want to thank the House for their approval. I thank you.

          Motion put and agreed to.

CONSIDERATION STAGE

ELECTORAL AMENDMENT BILL [H. B. 6A, 2017]

 

Amendments to Clauses 2 to 37 and 4th Schedule put and agreed to.

Bill, as amended, adopted.

Third Reading: With leave, forthwith.

THIRD READING

ELECTORAL AMENDMENT BILL [H. B. 6A, 2017]

THE MINISTER OF JUSTICE, LEGAL AND PARLIAMENTARY AFFAIRS (HON. CZIYAMBI): Mr. Speaker Sir, I now move that the Bill be read the third time.

Motion put and agreed to.

Bill read the third time.

MOTION

BUSINESS OF THE HOUSE

          THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA): Mr. Speaker Sir, I just need guidance of the Chair. The next item should be Order Number 4 which is now re-numbered Order Number 6. If you have the same understanding, I therefore ask and move that Orders of the Day Numbers 2 and 3 be stood over until Order of the Day, Number 4 has been disposed of.

Motion put and agreed to.

SECOND READING

ZIMBABWE IRON AND STEEL COMPANY (DEBT ASSUMPTION) BILL [H. B. 2, 2018]

Fourth Order read: Second Reading: Zimbabwe Iron and Steel Company (Debt Assumption) Bill [H. B. 2, 2018].

Question again proposed.

HON. CHAPFIKA: Thank you Mr. Speaker Sir, I rise to present the Report of the Portfolio Committee on Finance and Economic Development as it pertains to the public hearings conducted by the Committee on Zimbabwe Iron and Steel Company (Debt Assumption) Bill [H. B. 5, 2018].

          INTRODUCTION

         In terms of Section 141 of the Constitution of Zimbabwe, Parliament is mandated to engage the general public in its legislative and other processes of its committees and ensure that the interested parties are consulted about Bills being considered by Parliament.  In fulfilment of this constitutional requirement, the Portfolio Committee on Finance and Economic Development undertook public hearings for the Zimbabwe Iron and Steel Company (ZISCO) Debt Assumption Bill, 2018, which was gazetted on 19th January, 2018.  The Public Hearings were conducted in Harare, Kwekwe, Redcliff, Gweru and Bulawayo from 26-29 March 2018.

         The ZISCO Debt Assumption Bill seeks to facilitate the resuscitation of ZISCO, which shut down in 2008.  Several investors have been engaged by the Government but the deals never materialised due to various reasons, chief among them being the huge debt within the company.  To clean the company’s balance sheet, the Government of Zimbabwe is proposing to assume the company’s debt of about US$495 million and pave way for new financing into the company.  Debt assumption is a type of debt refinancing under which a specific financial obligation is officially transferred from one party to another and in this case, the ZISCO debt, after validation and reconciliation, will be transferred and taken over by the Government of Zimbabwe through legislation.

         The Bill’s objective is for the State to assume the debt of ZISCO subject to validation and reconciliation processes carried out by the Debt Management Office in the Ministry of Finance and Economic Development.  This will clean the balance sheet of the company, thereby paving way for investors to start on a clean slate.  The debts concerned are those accumulated before 1st January, 2017 listed in the Schedule to the Bill.  They total, just under US$495 million and is made up of debts to external lenders (approximately US$212 million); debts to external suppliers (approximately US$6 million); debts to domestic lenders (approximately US$58 million) and debts to domestic creditors (approximately US$219 million).  The debts to domestic creditors include; over US$15 million owed to ZIMRA for PAYE; over US$94 million classified as “payroll liabilities”; over US$39 million classified as “Pension” and substantial amounts to the Municipality of Redcliff and the City of Kwekwe.

 

GENERAL SENTIMENTS DURING THE PUBLIC HEARINGS

Harare

Participants mainly comprised of civil society representatives from the Zimbabwe Coalition on Debt and Development (ZIMCODD) and some creditors.  ZIMCODD members were totally against further burdening citizens and taxpayers by taking over debts for parastatals and private entities as this will set a wrong precedent for all struggling parastatals to follow the same route.  The potential direct beneficiaries of the Bill who are creditors supported the Bill on the basis that it will facilitate payment of their long outstanding debts.

         Kwekwe

Majority of the participants were former ZISCO employees and creditors. The general sentiment was in support of the Bill to facilitate payment of their pensions, terminal benefits and outstanding salaries.

         Redcliff

There was overwhelming attendance at the Public Hearing by former ZISCO employees who all supported the Bill and called for its speedy enactment to facilitate payment of all outstanding salaries, pensions and terminal benefits without delay.

         Gweru

The hearing was poorly attended and the participants comprised of creditors (ZINWA), former employees and ordinary citizens. There were mixed views on the Bill with creditors supporting its passage while ordinary citizens opposed it on the basis of the burden it will impose on ordinary citizens.

Bulawayo

Civil society organisations, creditors and ordinary citizens attended and there were mixed views on the Bill with the majority against its enactment on the basis of the effect on national debt which would be transferred to future generations.

         COMMENTS AND VIEWS RECEIVED

         Comments and views by those in support of the Bill

         Generally, the former ZISCO employees dominated the Public Hearings in Kwekwe and Redcliff.  They supported the enactment of the Bill on the basis of the direct benefits it will bring to them and their families in terms of liquidation of their long outstanding salaries as well as other downstream benefits. The following comments were made;

§  There is need for a comprehensive validation and reconciliation processes for all creditors as provided for in Clause 5 of the Bill as some companies who provided services to ZISCO are missing on the creditors’ list while others like ZINWA raised concerns on the understatement of their debt.  The ZINWA debt is stated as $38 000 in the Bill while ZINWA representatives argued that ZISCO owes the entity $1 187 630. 31 ($632 000 capital and the balance being interest). Other members of the public questioned the $495 million total debt figure after having read of the total debt being $380 million in The Herald Newspaper of January 18.  Zenith Medical Benefit Society who are missing on the schedule raised a red flag on the comprehensiveness and accuracy of the schedule. Ex-employees who have taken ZISCO to Court also called for the inclusion of their outstanding salaries whose validation is before the courts;

§  The $1.776 million listed as ‘other creditors’ on page 5 of the Bill needs to be detailed as the figure is too big to be consolidated;

§  The $94 million payroll obligation needs to be itemised;

§  There is need for clarity on Clause 6 on the date of closure or final  updating of the schedule of creditors according to Section 3(b) so that it is not open ended;

§  The Bill must include and clearly specify creditors for ZISCOs subsidiaries;

§  There is need for the Ministry of Finance and Economic Development to negotiate with some creditors for discounts especially on interest payments;

§  ZISCO is largely owned by the State and has considerable influence in the economy both up and downstream. As such, the public urged Government to urgently expedite the passage of the Bill as this would result in revival of the steel industry which would create employment (both direct and indirect), value addition to service providers like the transport and construction industries, boost exports and reduce steel imports among others;

§  Some creditors demanded the assurance that they will definitely receive their dues when the Bill is enacted as there is a risk that the Bill may be passed and they will not get what is due to them. Ex-employees felt let down as there have been several statements from Government on the re-opening of ZISCO which never materialised.  The hallmark of this failure being when the former President officiated at a signing ceremony for a deal between Government and ESSAR Holdings which was set to take over ZISCO and settle all outstanding debts;

§  The Bill should have timelines on when the respective creditors will be paid;

§  Ex-ZISCO workers raised concerns on the deplorable living standards they have been subjected to since the stoppage of ZISCO operations. It was reported that Kwekwe City Council had disconnected water supplies to Redcliff Town Council due to overdue water debts and the majority of creditors are ex-ZISCO employees.  As a result, the ex-workers are using water from unprotected sources, their children are not going to school and have no access to medical facilities and funeral policies as ZISCO was not remitting their contributions to the recipient funeral assurance companies and NSSA;

§  There is need to include interest on outstanding salaries and pensions to ensure their value for money is maintained;

§  Service pay, acting allowances, overtime allowances, shift allowances and demutualisation allowances must be included in the pensions figure;

§  Debt assumption will possibly result in injection of life in Redcliff and Kwekwe which then will act as nodes of development in line with the Open for Business narrative;

§  Ex-employees requested that their outstanding salaries be paid as a lump sum; and

§  Ex –employees who were retrenched in 1993 requested that they be included in the creditors list.

         Comments and views against the Bill

         ZIMCODD members and other ordinary citizens were generally against the passage of the Bill.  They raised the following issues;

·       The need for clarity on how the debt has accumulated and the need of an expeditious debt validation and reconciliation exercise due to the inconsistencies of the creditors’ list on the Bill and what the creditors are claiming.  Whoever is found to have caused accumulation of the debt has to pay instead of burdening ordinary citizens.  Questions were raised on why PAYE, pension and funeral assurance premiums were deducted from employees’ salaries and not remitted to the respective recipients who are on the creditors list.

·       The proposed debt assumption may have negative socio-economic effects on the ordinary Zimbabweans as it may put an extra financial burden on tax payers.  There is need to treat and approach the national debt in a holistic manner and not in isolation.  The Bill will result in an increase in Government debt (currently estimated at US$13.579 billion or 74.9% of GDP as at 31 December 2017.   Debt assumption of US$495 million will thus increase the debt to US$14.074 billion which is 77.6% of the GDP and taking into account the projected $875.8 million, new debts in 2018, the total Government debt may be estimated at US$14.95 billion by year end of 2018 and this is not sustainable);

·       Members of the public raised concerns that Parliament was soliciting for their views when Government had already assumed the debt as it was already paying outstanding salary arrears;

·       The accumulation of the Zimbabwe debt to over 77% violates provisions of the Debt Management Act, which stipulates that the Government debt should not exceed 70% of Gross Domestic Product (GDP). The gist of the submission was that the country cannot solve one problem by creating another. Accumulation of debts inversely affects sovereign credit ratings and increase interest spending;

·       Government should focus on the provision of critical services such as health and education instead of assuming debts.  The example of striking doctors was cited and with the economy in poor shape, this has a direct bearing on citizens’ rights enshrined in the Constitution.   Prioritising ZISCO debt at the expense of service delivery was argued to be unconstitutional and insensitive;

·       Members of the public were of the view that Government set a wrong precedent when it assumed the RBZ debt incurred when the bank supported identifiable farmers with inputs and this has to stop.  They urged Government to put more emphasis on improving corporate governance as assuming ZISCO debt was likely to encourage other parastatals like Air Zimbabwe which are facing viability problems to follow suit.  Moreover, they argued that there is no guarantee that there will be good corporate governance henceforth and the company will not bring a begging bowl to Government for another bailout.  They emphasised that ordinary citizens must not bear the burden of mismanagement of parastatals and state entities;

·       Some participants were of the view that ZISCO should liquidate its non-core assets and meet its obligations.  Assuming debts of a private company has got both positive and negative spillover effects but with the current situation in the economy, the negative effects of increasing debt while stifling other critical sectors outweigh the positive effects of the resumption of ZISCO operations;

·       The Bill only has got the list of creditors but has no indication of the debtors. The public urged Government to approach ZISCO debtors to partially offset the company’s creditors;

·       Legislators were urged to protect parastatals from collapsing rather than reacting when the horses have bolted;

·       There were revelations that an Audit report done by the National Economic Conduct Inspectorate (NECI) of the Ministry of Finance in 2008 has not been made public. The Committee was requested to request for that report which will expose the rot which led to the collapse of ZISCO as well as identifying the culprits and bring them to account; and

·       The new investor should take over ZISCO debts as there is no point in Government taking over a $500 million debt for an investor who brings only $1 billion. The level of investment is considered not commensurate with the burden imposed on citizens.

                Benefits of ZISCO

Companies likely to benefit from the opening of ZISCO    

Benefits from the  opening of ZISCO

A description...

A description...

 

         Committee Observations and Recommendations

·       There is need for the Debt Management Office to validate and reconcile the ZISCO debt to ensure that the Government assumes the correct and authentic debt as provided for in Clause 5.

·       Interest on debts needs to be validated by interest bureau companies and auditors.

·       Government must provide clarity on what will happen to minority shareholders after ZISCO takeover.  The responsible Minister must confirm that this intervention will wipe out all minority interests without exception.

·       The Committee is concerned with the level of inefficiency over the wage bill at ZISCO.  It was improper to continue engaging workers, who would come to work, log in and do nothing thus causing the ballooning of the employment related debts.  This level of inefficiency should not be tolerated.

·       There are social issues which were raised by Redcliff residents which the responsible Ministry should urgently look into and address.

·       The Committee recommends updating of the creditors list as well as availing of the debtors list for ZISCO.

·       The Committee recommends verification of the list of ex-employees who are getting 2 months’ salary arrears every month.

         Subject to this Mr. Speaker Sir, the Committee resolved to submit this Bill for approval by this House.  I thank you.

          HON. GABBUZA: Thank you Mr. Speaker, I think the question is not about the importance of ZISCO to the economy.  We all know how important ZISCO is to this economy.  I think the question that the Minister is putting before the House is, let us have Government taking over the debt so that the new investor can start on a clean balance sheet without the debt.

So now we further on ask, is the debt the problem in attracting investors into ZISCO?  Are debtors complaining about the ZISCO debt?  Are they saying we will not come into ZISCO because ZISCO has a debt?  Legally, what happens if there is a new investor and the one who created the debt was Government, was the major share holder, will the investor still worry about a debt that was not created by him because this was a legacy debt, it belongs to the old investor and the old investor or shareholder is Government.

To me, I do not really see why we must be bothering ourselves as to taking over the debt because automatically it follows that the debtors, the people that are owed money, the creditors will definitely chase Government because Government was the major shareholder in the previous ZISCO.  I do not see how they will chase the new investor because the new investor is a new person unknown to them, but again, if I go back, Mr. Speaker, is the debt the problem to the investor?

When ESSAR came into the deal and took over ZISCO, was there no debt?  The debt was there but the investor was still able to come in and operate it.  Perhaps the starting point , Mr. Speaker, is for the Minister to explain to us exactly why the ESSAR deal collapsed, then it becomes easier for us to understand whether it is the issue of the debt because according to my understanding, we have had two investors before.  ESSAR came in and operated but they disappeared Asia Metal was interested.   They came in but Government pushed them out.  They were not interested in Asia Metal.  There were many investors.  Is the problem the debt?

Now, if we do not address certain fundamentals, even if we inherit that debt and we take it over as Government, there are key issues that the investor will be interested in ensuring they are solved before they can put in their money.  For example, if the investor comes in with his money, the day he wants to pay his workers at ZISCO, will the bank be able to give him that money because that money will not be coming from Europe straight to the workers?  It has to go through the banking system.  Have we sorted or agreed with the conditions for the banking system that if there is an investor, allow him to access his money?  If the investor makes a profit, are our systems sorted out to enable this investor to take back the profits that he has made to his country?

I am sure these are the key salient issues that we must address other than just looking at the debt because I strongly believe the investor is not very worried about the debt.  Fair and fine, let us agree Government takes over the debt, but how about these other key issues? 

One of the problems that made ESSAR leave was the fact that they could not get the mining rights from the Ministry of Mines and Mining Development.  The Ministry of Environment, Water and Climate provided the rights to access water.  Then the Ministry of Energy and Power Development assured them that we will give you the energy, but the Ministry of Mines and Mining Development did not give them the rights to access the mineral which they so needed for the operation of that plant.

Now, Hwange Colliery, is it ready to supply the coke?  Is the Railways able to carry the coal to ZISCO?  As long as we do not address these things together with the debt, I am sure we will still come back to this Parliament.  The Minister will still come back to this Parliament announcing that the investor has left or he is not able to start like we saw with these gentlemen who had signed for the rehabilitation of Beitbridge-Masvingo-Chirundu highway because there are certain key fundamentals that need to be addressed in the economy to attract the investor, not just the debt.  I have just mentioned some of them.

We have generally talked about the ease of doing business.  That is a major factor for every investment that comes into this country.  For as long as we just look at the debt and do not address these other things which are serious bottle necks to every investor who wants to start up, we will not find any investors.  Now, we also have the issue of workers.  The workers’ salaries - that is a local debt.  Where are the workers going to claim their money?  Is it from Government or from the former ZISCO who is Government because that is the major shareholder of the former ZISCO or are they going to claim their arrears from the new investor?  I think all these issues must be sorted out and made clear even within that deal. 

Now, the Minister yesterday reported that one of the things that the new investor is going to do is to put up a plant.  I did not hear in his report what the shareholding of Government is because we have already the infrastructure called ZISCO.  Now, what happens?  Are they putting up a new plant?  Which part of the plant?  Is it just the furnaces because we have all this other rolling stock and the equipment for rolling up the bars and the angle iron equipment moulding?

All this is infrastructure that is already in the hands of Government and must be given a certain percentage of value so that it determines the shareholding in the new investment.  Perhaps the Minister must also indicate to us what exactly the new holding structure being proposed is between the new investor and the Government because these are key.  My view also, Mr. Speaker, would be to ensure that key players like the National Railways of Zimbabwe and Hwange Colliery Company, they must have a stake in this deal.  They must have shareholding.  It is important because it affects them directly and they will affect ZISCO’s operations directly.  So, we need to ensure that these key stakeholders have a share into the operations of ZISCO so that there is no way we will tomorrow blame Hwange for not playing its part to ensure that there is coal at ZISCO or there is coal for the coke ovens.

So, all these are issues which I think the Minister must seriously think as they negotiate this deal - the ability for the major shareholders, particularly the National Railways of Zimbabwe and Hwange Colliery to have a serious stake besides just Buchwa Iron Ore Mines, but these other key players.  I think they must be considered to be included in the deal.  Thank you Mr. Speaker, these were my brief remarks on the deal.

HON. NDUNA:  Mr. Speaker, I support the takeover of the debt at ZISCO Steel for the following factors.  My predecessor spoke of the issues of supporting other industry lines, in particular the Hwange Colliery.  We visited Hwange Colliery as a Committee on Mines and Energy.  We saw the coke oven batteries.  We saw how much coal would come up in terms of value after being beneficiated or after becoming coke and before it is utilised at ZISCO Steel.  So, the issue of the resuscitation of ZISCO Steel speaks to and about the beneficiation and value addition of our God given natural resources and it is very key and it is in my view, long overdue.

Mr. Speaker Sir, it is then my clarion call that as the issue of the debt assumption of ZISCO Steel, they take over the warehousing of that debt.  There should be a meeting of minds from all other sectors that my predecessor spoke about.  The Hwange Colliery should be involved and the investor should also be involved.  Further to that initiative by the Minister of Finance to declare that place a special economic zone, that is going to become a panacea for that de-industrilisation Mr. Speaker. This will make sure that we get the investor to repatriate both capital and profits because this is one of the initiatives that is embraced or embedded in the Special Economic Zones, so that it puts paid the speculation about whether or not the investor is going to be able to recoup their investment after they put in their money.

Further to the takeover of that debt, I ask that place be declared a special economic zone so that the investor can certainly have safe sleep. In my view supporting the local agenda, that is the ZIM ASSET, that now speaks to value addition of our God-given natural resources. We are also in the same vein supporting the SADC industrilisation strategy of 2015. I am alive also in the same vein that the Africa Agenda 2063 is also supported by this initiative. So, we should not be blinded Mr. Speaker Sir to the issues of local economic development when we talk about the resumption of this debt or the takeover of ZISCO Steel debt. We should know that it also caters for all other regional initiatives and the continental initiative and ultimately the Sustainable Development Goals.

It is my fervent view that ZISCO Steel is in the same place with the likes of David Whitehead Textiles which are under judicial management. It is also my clarion call that when this debt is assumed by Government there is also the payment of the creditors, the majority of which are workers like Hon. Gabbuza has alluded to so that we are not running away or taking over debt and leaving the creditors to wallow in poverty Mr. Speaker Sir. If we are going to deal with the creditors in the future, it should be well structured in the agreement with Government and the investor so that it is open and put in bear, and it is known that the workers or the majority of creditors are not going to wallow in poverty.

Mr. Speaker, I want to congratulate the initiatives by the Minister of Transport and Infrastructural Development. If you want to see and go far, you only need to stand on the shoulders of giants. We now have that diaspora initiative which has brought in the wagons and engines for NRZ. The assumption of this debt at ZISCO Steel should be seen in the same light that NRZ and the Ministry of Transport is now supporting the Ministries of Industry and that of Mines, and such like. The left hand should know what the right hand is doing Mr. Speaker Sir.

It is my opinion that when we are now dealing with the ZISCO Steel debt, it should not be dealt with in isolation. It should actually be a ZISCO Steel reform programme that involves the Ministers of Transport, Finance and Mines - because after the assumption of this debt, we should also look at the dragline. The dragline is this humongous piece of equipment at Hwange Colliery that will drag coal in its enormous quantities at one haul, which costs about US$200 - 500 million, but this will bring in a lot of coal that is going to be used as a throughput at ZISCO Steel. So, whilst we deal with the ZISCO Steel debt, let us also deal with capacitation of the Hwange Colliery equipment and mining equipment initiative.

I want to thank you for giving me this opportunity Mr. Speaker Sir and I say I support the assumption of this debt.

THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA): Thank you Mr. Speaker Sir and once again, I want to thank Hon. Chapfika, Hon. Gabbuza and Hon. Nduna for their contributions in support of the assumption of the ZISCO Steel debt by the state. Let me say from the outset that the intention is to present to any would be investor. Right now we have a Chinese investor. If there is a change of mind by the Chinese investors we want to be in a position where we present to any investor, Chinese or otherwise, a clean slate on the base of which they can mount their investments. That is the whole intention of this Bill.

I want to say also that it is a multi-pronged approach to revive the steel industry in this country. We cannot just look at ZISCO Steel; we must also look at the railways as was mentioned by Hon. Gabbuza. We must also look at the output of coal from Hwange Colliery and I want to say to this august House that measures have already been taken to rehabilitate and support increased coal production at Hwange Colliery. We have capitalised Hwange Colliery through provision and issuance of Treasury Bills, that has been done. As a result, we have seen the coal output increasing from a low of 30 000 metric tonnes to something in excess of 300 000 metric tonnes per month.

Also, with respect to railways, we have a programme of rehabilitating the railways which already Hon. Nduna has just made reference to, but back to ZISCO Steel. Hon. Chapfika I want to thank the Committee for its support. I am aware from your report that there are pros and cons to the whole Bill, but in the end the cons weigh heavily in support of the Bill. So, I want to thank the Committee for that support. Let me just answer some of the issues that you raised specifically.

The verification, validation and reconciliation will be done by the Debt Management Office which we set up and which is resident in the Ministry of Finance and Economic Development. It is dedicated to negotiating loans and to building expertise and negotiation skills on how to negotiate loans to reschedule and so on. So, the verification, validation and reconciliation will be done by that office. Although we list here a schedule of creditors, we merely lifted that schedule from the books and statements of accounts of ZISCO Steel. However, before we can settle them as a state, we must validate, reconcile and verify, that I want to assure you is what will happen.

          Again if creditors are missing from the schedule, it does not mean that those liabilities will not be honoured. The Bill has a provision which allows those creditors who have been left out to prove their claims and this will be done by the Debt Management Office. In a normal situation, this company should have been liquidated years ago and creditors would have been entitled maybe to one cent in a dollar but we have not followed that route. We are allowing any creditors to prove their claims against ZISCO Steel.

           You ask that we give assurances that all the debts will be paid. Yes, I give those assurances, but not today and not tomorrow but when the situation of our economy improves, we should be able to honour these obligations and they stand a liability on the books of Government.  Therefore, as you know chikwereti hachiori and we will certainly make sure that we honour these obligations.  With respect to when we honour these obligations, I want to hesitate to say it will have to depend on the improvement in our economy and I am very optimistic that this debt in terms of improvement and economic recovery will come sooner rather than later.  Let me say that I still need to officially be informed.

Part of the cleaning up entailed that the coke ovens will be separated from the furnaces and we found a new investor who is going to take over the coke ovens and that new investor has already taken occupation/possession of the coke ovens.  In addition, the new investor is going to assume the debt which is owing to KFW of Germany, which is around 163 million to 174 million.  So, as we speak, we already have an arrangement whereby the total debt of ZISCO Steel is going to be reduced by that amount between 163 million to 174 million.  The debt still needs to be validated, verified and reconciled.

          So, it shows that there is some momentum that is taking place, which will lead to the resuscitation of the steel industry in this country.  On the issue that I have just made reference to, where there is a new investor in respect of coke ovens while they are taking over the liability, Government will remain the guarantor in the event that the investor again defaults.  So, there is that assurance again to the KFW that we are not running away from our obligations as guarantor.

          With respect to clarity on how the debt has been accumulated, Mr. Speaker Sir, the clarity will come through validation, clarification and reconciliation.  They will be required to produce all the documentation necessary to prove that they are indeed owed that money, otherwise Government will not honour that debt.

          Hon. Gabbuza, you make a very sweeping statement.  The record says debt is not a problem.  That is what he says.  Clearly, ESSAR ran away for some other reasons.  Can we imagine half a billion worth of debt and you say to an investor who has nothing to do with that liability, come and take over this business but you are going to assume a debt of half a billion and expect that the investor will come willingly. 

From what I understand, ESSAR had other views.  In fact, they were more interested in exporting iron ore in order to pay whatever they were assuming.  They were not much interested in doing the steel plants but in exporting iron ore, which means that they went to an extent of envisaging a conveyor belt from Zimbabwe to the sea to carry the iron ore.  It is when we discovered that in fact problems started to emerge.  Anyway, the point was also made by Hon. Gabbuza that they ran away because there were no mining rights.  We did not refuse them mining rights of iron ore to feed into the furnaces.  What we said no to was exporting iron ore as if that was the core business for which they had bid for ZISCO Steel. 

What this country needs at the moment is a steel industry.  We want to go back to where we were may be ten or so years ago where we were producing at least a million metric tonnes of liquid steel and even exporting because we were producing more than our requirements.  That is where we should go because no country can prosper and do development without a steel industry.  We need steel for virtually almost everything including whether we are talking about railways, whether we are talking about bridges or we are talking about construction.  Currently, I believe that we are importing steel annually, 400 million worth of steel annually.  So, this resuscitation will basically mean that we will no longer need to expend valuable foreign currency in importing steel for our construction industry.

Again, I think I have already responded to Hon. Gabbuza that we have a multi-pronged approach on addressing the core-production at Hwange Colliery, addressing the transporter, the National Railways of Zimbabwe and also addressing the issue of taking over of the coke ovens.  Again, I want to give the assurance that when we are taking over the liabilities, it means these liabilities are being taken over by the State.

Hon. Nduna, thank you very much for your support for the take over of the debt.  I agree with you and a decision has been taken to designate Kwekwe, and Redcliff in particular as a special economic zone for the steel industry.  Mr. Speaker Sir, with those remarks, I now move that the Zimbabwe Iron and Steel Company (Debt Assumption) Bill [H. B. 2, 2018] be now read a second time.

Motion put and agreed to.

Bill read a second time.

Committee Stage: Tuesday, 15th May, 2018.

On the motion of THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA), the House adjourned at Sixteen Minutes to Five o’clock p.m. until Tuesday, 15th May, 2018.

BLOG COMMENTS POWERED BY DISQUS
National Assembly Hansard NATIONAL ASSEMBLY HANSARD 10 MAY 2018 VOL 44 NO 57