GuarantCo provided a renewable liquidity guarantee to investors in the first tranche of the RINP issued by Ulendo RINP Plc (“Ulendo”). Ulendo will use this money to discount interim payment certificates provided by the National road Fund Agency (“NRFA”) to local road contractors, thereby allowing the contractors to access working capital to continue projects and help the Government of Zambia meet its ambitious road programme.
Note investors require certainty of payment, which is provided by the liquidity guarantee even if payments are delayed from NRFA and also to bridge the time before payment is made under the insurance provided by the African Trade Insurance Agency (“ATI”) to cover the non-payment by NRFA. Accordingly, GuarantCo provides a complimentary product to ATI’s and plays to each party’s respective strengths.
The ability to access working capital is often a constraint for local road contractors and reduces their competitiveness compared to larger international contractors. The RINP should raise significantly more funds than currently available to the market and will support the local contractors and help drive the ambitious Zambian road constriction plan.
Additionally, the ability to fund the road sector through the capital markets, once proven, could be replicated in other markets.
Furthermore, supporting this initiative will help support local road contractors, securing jobs and livelihoods both directly within the contractors and also indirectly through the ambitious road construction programme.