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African Development Bank Offers New Financing Opportunities for Zambia’s Water and Agriculture Sectors
An African Development Bank team of experts visited Zambia from 23 to 27 July to identify businesses in the nation’s water and agriculture sectors eligible for new financing mechanisms it is offering to the southern African nation.
The team, led by Martin Fregene, Director of Agricultural Infrastructure and Wambui Gichuri, Director of Water Development and Sanitation met senior government officials from the Ministries of National Development and Planning, Agriculture, Livestock and Fisheries Development, Environment, Water and Sanitation, to discuss the policy framework for non-sovereign financing of agriculture and water resources management programs, using alternatives to public loans with government guarantee.
The team also held talks with private-sector actors including the Millers Association, Chamber of Commerce and Industry, Poultry and Dairy Associations, Grain Traders Association, Bankers Association, Multi Facility Economic Zone, Musika, and the Zambia Development Agency. In addition, the team met with development partners, water companies, water services regulator (NWASCO) and water resources authority (WARMA).
Currently, the Bank’s supports Zambia’s water sector via government guaranteed sovereign loans and grants to the water and sanitation services. The water companies continue to face challenges in growing their businesses through extension of services to many of the newly developed areas.
The Bank is offering non-sovereign financing to the water companies for the last mile. Under the NSO instrument, the Bank will support 33% of the program cost, while other financiers and the client would cover the rest with a tenure of 15 years and a grace period of 5 years. The terms are competitive, giving the water companies the much needed boost for the last mile connectivity, storage and augmentation of supply. With all the studies and other requirements in place, the Bank can conclude project financing and approval within six months.
Zambia’s water companies, the state water regulator NWASCO, and the government, welcomed the instrument.
Each of Zambia’s three water companies have potential projects of over US$120 million. The companies will work on the feasibility studies and designs prior to seeking non-sovereign financing from the African Development Bank. The water companies are expected to strengthen their governance and performance to better utilize and service the financing. The Lusaka, North Western and Nkana water and sewerage companies committed to work on potential projects for financing under this window
The Bank’s support to the agriculture sector will be private sector-led. The Bank will support Zambia to reform its agricultural trade policies that allow for private sector participation in export of agricultural commodities.
Additional investments, under the African Development Bank’s Transformation of African Savannah Initiative (TASI) would leverage on private sector financing to develop public-private projects that connect smallholder farmers to the higher end of agricultural value chains.