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Zambia, Ulendo Road Infrastructure Note Programme

Providing Zambian road contractors with the liquidity they need to complete government contracts.


Click here to read more on GuarantCo’s achievements in 2015.


The Government of Zambia has embarked upon an ambitious road improvement programme designed to shift Zambia from a landlocked to a land-linked country. Better road infrastructure will increase the country’s connectivity and accessibility, cut transport costs and times and reduce poverty by creating jobs for Zambians. Investment in the sector will support economic growth and help diversify the Zambian economy from its heavy dependency on copper exports. In the past, the road-transport sector was dominated by foreign contractors who had the capital and technical capacity to execute large contracts. As a means of empowering Zambian contractors, the government introduced a policy requiring at least 20% local component with every road contract. A further policy, issued in 2015, designated 30% of local tenders for female contractors. These initiatives have driven local contractor participation in the industry, but such small and medium enterprise (SME) contractors face challenges in accessing sufficient financing, particularly as there can be delays in the timing of any payments due from governmental bodies.


The Focus Investment Group (FIG) has been involved in a number of financing initiatives to support local road contractors. Through its Focus Financial Services subsidiary, it was already involved in invoice discounting but realised that it was unable to service the demand without significantly scaling its own funding resources. Accordingly, FIG established Ulendo RINP Limited (Ulendo), to raise funds from local capital markets through a listed Kwacha medium-term note programme and be available to international and local investors, including the public. Interim payment certificates (IPCs) are issued by the National Road Fund Agency against the satisfactory completion of set construction targets, negating any performance risk associated with the contractor, but payment under the IPCs can be delayed, which can strain the financial resources of the local contractors. The funds obtained by Ulendo would be used to purchase IPCs from local contractors at a discount that would provide contractors with the certainty of timely working capital to continue to operate. Ulendo would then take on the timing and payment risk under the IPC but potentially secure the full value to cover its operating costs and debt service, to pay interest to investors.

FIG approached GuarantCo to provide a liquidity guarantee covering interest payments to investors in the note programme and to provide certainty of payment. Should there be non-payment (rather than just delayed payment) against the IPCs, then this is insured by the Africa Trade Insurance Agency (ATI).Collectively, this has delivered the necessary credit enhancement to ensure the programme’s success.


The project is an innovative capital markets transaction for Africa, and certainly for Zambia. It is anticipated that GuarantCo’s involvement in strengthening local capital markets to fund the road sector will, once proven, have a demonstration effect for other markets. With support from TAF and working with FIG, GuarantCo intends to increase investor participation in the next tranche of notes through ongoing investor education around the initiative. Empowering local contractors to participate in the government’s ambitious road building programme will not only facilitate swifter progress in improving Zambia’s road infrastructure, it will help local road contractors to complete government contracts, securing employment and helping to reduce poverty levels in Zambia.

Click here to read more on GuarantCo’s achievements in 2015.