ZESCO'S STAG Loan Guarantee Cancelled By Mwanakatwe
The Secretary to the Treasury Fredson Yamba has revealed that Finance Minister Margaret Mwanakatwe has recalled and cancelled the controversial US$500 million sovereign guarantee issued to STAG African Investments Limited on behalf of power utility ZESCO.
Mr Yamba has stated that STAG failed to make any disbursements over a prolonged period of time after the Sovereign Guarantee was issued and all the conditions fully met by ZESCO.
He continued that the Ministry of Finance resorted to other financing options in support of ZESCO’s need for the critical electricity power imports.
The full statement is below;
ON THE TREASURY GOVERNMENT OF ZAMBIA USD 500 MILLION SOVEREIGN GUARANTEE ISSUED TO STAG AFRICAN INVESTMENTS LIMITED
MOF/Debt Management – , May 30, 2018
www.mof.gov.zm
Ministry of Finance
The Government of the Republic of Zambia through the Ministry of Finance issued a Sovereign Guarantee in the sum of Five Hundred Million United States Dollars
(US$500,000,000.00) in favour of Stag African Investments Limited.
Stag African Investments Limited is a company incorporated under the Companies Act Chapter 388 of the Laws of Zambia with registration number 120150135298.
Stag African Investments Limited and Zesco Limited entered into a loan agreement through which Stag African Investments Limited agreed to make available a loan of Five Hundred
Million United States Dollars (US$500,000,000.00) for the importation of emergency electricity power, on the terms and conditions set out in the Loan Agreement.
Owing to the significant amount of the loan, a term of the Loan Agreement was that it required to be secured by a Sovereign Guarantee.
The Ministry of Finance processed Zesco’s request for the Sovereign Guarantee made pursuant to the Loan Agreement, and the draft document was duly approved by the Attorney-General.
Thereafter, the Ministry of Finance recommended the issuance of the Sovereign Guarantee owing to the critical need for electricity power to the economy which needed to be imported to cover the deficit. The Ministry of Finance facilitated the issuance of the Sovereign Guarantee accordingly.
The Guarantee was issued in line with the Loans and Guarantees (Authorisation) Act, Chapter 366 of the Laws of Zambia.
The Sovereign Guarantee was signed on 9th September 2016 by His Excellency the President of the Republic of Zambia exercising the functions of the Minister of Finance pursuant to
Article 91 of the Constitution of Zambia (as amended by Act No. 2 of 2016), as read together with Section 4 of the Statutory Functions Act, Chapter 4 of the Laws of Zambia, due to the critical need for electricity power imports. It should be noted that this happened before the President appointed his Cabinet.
Since the issuance of the Sovereign Guarantee, all the conditions were fully met by Zesco but no disbursements were made by Stag African Investments Limited over a prolonged
period and consequently, the Ministry of Finance made recourse to other financing options in support of Zesco’s need for the critical electricity power imports.
In view of these developments, on 24th April 2018, the Minister of Finance, Hon. Margaret Mwanakatwe, MP recalled and cancelled the Sovereign Guarantee issued in favour of Stag African Investments Limited.