HARARE - Chinese contractor Sino-Hydro has signed an agreement with the Zimbabwean government for the construction of a new dam northeast of the capital Harare that will augment supplies from four other reservoirs which are failing to cope with demand, water minister has said.

Minister of Environment, Water and Climate Oppah Muchinguri-Kashiri told news agency New Ziana Wednesday that an environmental impact assessment will be done before the construction of Kunzvi Dam begins 67 km outside the city.

The estimated cost of building the dam is $400 million, but all major works including laying a pipeline and building a new waterworks will push the bill up to $850-900 million.

"Government policy is that wherever there are such major developments many people will be displaced so we are going to carry out that exercise to make sure that component is addressed," Muchinguri-Kashiri said.

The government had intended to build the dam as far back as the early 1990s, with interested contractors in the private sector being invited for on-site tours on a number of occasions, but financial challenges had stalled the project.

Muchinguri-Kashiri said Sino-Hydro had agreed to do the project under a build, operate and transfer arrangement.

Kunzvi Dam, which is situated on the Nyagui River in Goromonzi district, Mashonaland East province, is seen as the solution to the city's water woes which have persisted for decades, forcing authorities to impose water rationing during the dry months.

Currently, some residential areas are going for five days a week without municipal water supplies.

The new dam is expected to produce 250,000 cubic meters for the city daily.

Harare has 2.5 million residents and also caters for another 2 million consumers in the satellite towns of Chitungwiza, Norton, Ruwa, Epworth and other settlements on its boundaries, putting the combined need of water at 1,200 megaliters a day.

On its own, the city requires 800 megaliters a day but is only pumping 450 megaliters.

All its four reservoirs - Harava Dam, Seke Dam, Lake Chivero and Lake Manyame -- are on the Manyame River and suffer heavy pollution from the surrounding urban settlements and farming areas.