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Bonds and Guarantees

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Bonds and Bank Guarantees can assist businesses in tendering and negotiating better contract terms. In fact, it is common for parties to a business transaction to insist on the provision of a guarantee or bond as a standard means of securing the terms of a contract. The Bank has the ability to provide such guarantees or bonds in favour of third parties, to support the trading activities of businesses.

Bonds and Guarantees Objectives

The mandate of DBZ is to contribute to the development of economically viable enterprises in Zambia. The broad objectives are to select projects that contribute towards:

  • Foreign exchange savings and / or earnings.
  • Development of local technology and of manpower skills.
  • Creation and expansion of permanent employment.
  • Use of local raw materials.
  • Development of a robust indigenous Private Sector.
Bonds and Guarantees

Terms and Conditions of the Facility

(terms subject to change without notice)

A. TENDER GUARANTEE (BID BONDS)

Mainly, a bank guarantee will be required by buyers and tender committees to support a tender for a contract. The guarantee is usually for an amount between 1 % and 5% of the contract value.

The bank’s support in the form of a guarantee is an indication to the buyer and tender committee that the tender is a serious offer and the party submitting it is financially competent to enter the contract. The guarantee also indicates that on award of the contract, subsequent guarantee requirements to secure performance and/or advance payments will be forthcoming.

B. PERFORMANCE GUARANTEE

A performance guarantee is an undertaking to pay a specified sum of money to a third party in the event of failure to carry out the terms of the contract. This type of guarantee is commonly required to secure performance and amount between 5% and 10% of the contract value.

C. ADVANCE PAYMENT GUARANTEE

This type of guarantee is usually required for money released where, under the terms of the contract, an advance payment has to be made to cover the initial costs of commencing contractual work. The amount of an advance payment varies between 10% and 20% of the contract value.

D. RETENTION MONEY GUARANTEE

There are contracts which require that a percentage of each payment should be withheld until the project has been completed and accepted. This type of guarantee enables your business the total amount of each payment while assuring the other party that funds will be payable in the event of failure of performance.

E. MAINTENANCE GUARANTEE

The Maintenance Guarantee is intended to ensure that once construction has been completed, the obligation of the contractor will be fulfilled during the maintenance period. This type of guarantee is common with construction contracts.

F. ZAMBIA REVENUE AUTHORITY(ZRA) CUSTOMS BONDS

Payments to ZRA Customs and Excise need to be confirmed before the relative merchandise can be moved from any port. This requirement can cause delays in shipments and business transactions, but guarantees issued by the Bank are acceptable to the ZRA and allow merchandise to be transported more expeditiously. Additionally, guarantees can be arranged for customs authority to permit the temporary import/export of samples or exhibits without payment of customs duty.

F. TENURE/PERIOD

All guarantees issued by the Bank will indicate a fixed expiry date after which the Bank will not accept any claims. Normally, guarantees will be for periods between 90 days and 365 days.

G. TENURE/PERIOD

All guarantees issued by the Bank will indicate a fixed expiry date after which the Bank will not accept any claims. Normally, guarantees will be for periods between 90 days and 365 days.

H. SECURITY

Collateral is required and will be considered on a case by case basis