An analysis of the use of project finance in Zambia infrastructure projects : the case of Maamba Collieries.

Project Finance has been regarded as a one-stop-shop capable of addressing the gaps
in infrastructure financing of most countries. In Zambia, much has been talked about
regarding the need for the country to improve its infrastructure. Stakeholders in
development have realized that infrastructure is an essential driver of competitiveness
which is critical for ensuring the effective functioning of any economy and the
country must have basic reliable infrastructure, among others; airports, road
networks, railway lines, energy generation, and transmission installations, and
telecommunication infrastructure. This research analyzed the use of project finance
in Zambia’s infrastructure projects using Maamba Collieries as a case study. This
research adopted a qualitative approach and interviews were used as the data
collection method from a total of twenty (20) key informants. Data was analyzed
using thematic analysis. Hence, having explored the relevant body of literature, the
targeted institutions included Maamba Collieries Limited as it used project finance
in developing the power project, a deal described as the project finance deal of the
year 2016, financial institution which was the source of long term debt financing, an
investment promotion and facilitation agency, an energy regulatory body, a state
energy utility company, and a unit responsible for Public-Private Partnerships (PPPs)
as they all represent government a host to project finance deals. The research findings
sufficiently supported the use of project finance to close Zambia’s infrastructure gap.
The experts who were interviewed had no doubt that project finance is an appropriate
financing model to develop the country’s infrastructure. The growth of project finance
in Zambia is constrained by factors such as; the lack of financial resources dedicated
to PPP projects, unclear guidelines and regulations to both authorities and the private
sector, as well as inadequate expertise in areas such as economics, law and finance in
the government departments Nevertheless, the findings of this research also revealed
that the cornerstone of the success and continued use of project finance depends on
political will and policy consistency.
KEYWORDS: Project Finance; Special Purpose Vehicle; infrastructure; Corporate
Finance; Energy