Zim’s momentous push towards world-class infrastructure

Tawanda Musarurwa ECONOMISTS maintain that there is a correlation between increased investment in infrastructure and economic growth and development. The Government’s Vision 2030 — to attain an upper middle-income economy by the year 2030 — envisages increasing the country’s gross national income (GNI) per capita to between US$3 896 and US$12 055 per annum. This […]

Zim’s momentous push towards world-class infrastructure

Tawanda Musarurwa

ECONOMISTS maintain that there is a correlation between increased investment in infrastructure and economic growth and development. The Government’s Vision 2030 — to attain an upper middle-income economy by the year 2030 — envisages increasing the country’s gross national income (GNI) per capita to between US$3 896 and US$12 055 per annum.

This essentially translates to high standards of living and world-class services, particularly health and education.

To the extent that GNI is the total amount of money earned by a country’s people and businesses, increasing employment and economic activities are two important elements in achieving an upper middle-income economy.

In its October 2020 Fiscal Monitor, the International Monetary Fund (IMF) estimated that increasing public investment by 1 percent of gross domestic product (GDP) could boost growth, private investment and employment by 2,7 percent, 10 percent and 1,2 percent, respectively, after two years.

Targets

Zimbabwe’s infrastructure development drive is guided by the National Development Strategy 1 (NDS1) 2021-2025.

Major targets under the five-year plan include construction of additional 280 kilometres (km) of electricity transmission and distribution infrastructure, as well as increasing access to potable water from 77,3 percent to at least 78,3 percent.

The Government also targets to expand access to improved sanitation facilities from 70,2 percent to 77,3 percent in both urban and rural areas, and to increase the number of kilometres of road network that meet the Southern Africa Transport and Communications Commission standards from 5 percent to 10 percent. The internet penetration rate is expected to be increased from 59,1 percent to 75,4 percent, while the mobile penetration rate is forecast to grow to 100 percent.

Economist and lecturer in the Department of Economics at the University of Zimbabwe Professor Albert Makochekanwa said increasing investment in infrastructure can help elevate the country’s economic status.

“There is a very strong positive relationship or correlation between state of infrastructure and economic development. The causality can be from either side.

“But for developing countries like Zimbabwe, the one from infrastructure to economic development is what will make the country leapfrog from a developing country to a middle-income or developed country,” he said.

Poor economic infrastructure can be a stumbling block for businesses, raising production costs and making local players uncompetitive.

For instance, the “Promoting SMEs (small and medium enterprises) Competitiveness in Zimbabwe Report 2023” — which was produced by the International Trade Centre, in collaboration with the National Competitiveness Commission — cited poor infrastructure as one of the biggest challenges faced by small businesses in the country.

“Deteriorating transport infrastructure and the high costs of logistics affect the timeliness of delivery for SMEs, as survey results showed,” reads part of the report. Priority should be given to improving the transport sector, thereby addressing logistics bottlenecks and ensuring reliable infrastructure, especially in rural areas. This will also go a long way in developing stronger value chains.”

Similarly, in its Zimbabwe Infrastructure Report 2019, the African Development Bank (AfBD) identified four broad areas that will require intervention to drive the country’s economic growth — information and communication technology (ICT); transport; water supply and sanitation; and electricity.

During the first half of last year, two key national projects (in transport and energy) were completed. The commissioning of the Hwange Thermal Power Station’s new Units 7 and 8 has added 600 megawatts (MW) to the grid, helping close the current power deficit.

Further, work has since commenced on the refurbishment of Hwange’s Units 1 to 6, which have a capacity to produce 920MW.

Energy drives economic growth and development. Also commissioned last year was the refurbished Robert Gabriel Mugabe International Airport, whose passenger handling capacity has risen from 1,3 million to 6,7 million passengers a year.

Road development

There has been significant progress in the road rehabilitation programme, with work on the of 582,4km Harare-Beitbridge Highway nearing completion. The highway is a critical arterial route in the North-South Corridor.

The modernisation of the Harare-Beitbridge road has been included in the COMESA -ECA-SADC Tripartite and the African Union Programme for Regional Corridor Development. With Zimbabwe being a signatory to the African Continental Free Trade Area (AfCFTA) Agreement, which came into effect in January 2021, the modernised highway will help the country to effectively tap into the integrated African market of over 1,2 billion people.

Other key road infrastructure projects include the upgrading and rehabilitation of the Harare-Chirundu Road, which has since commenced, and the Beitbridge-Victoria Falls Road. Another key development is the ongoing Mbudzi Traffic Interchange on the Harare-Masvingo highway, which will ease traffic congestion at the intersection of three major roads — High Glen, Simon Mazorodze and Chitungwiza.

Closely linked to the enhancement of the country’s road infrastructure is the modernisation of ports of entry, in line with the goal of making Zimbabwe the region’s logistics hub.A notable development in this regard is the Beitbridge Border Post, which has been modernised at a cost of US$300 million.

Similar initiatives are being extended to the country’s other ports of entry, namely Chirundu, Forbes and Plumtree.

“To benefit from the new trade opportunities offered by the AfCFTA, it is vital to optimise border management, collaborate with regional institutions to minimise delays and digitise certain aspects of trade logistics,” says the International Trade Centre.

The country has announced plans to roll out a digital border management system.

“The Online Border Management System entails the full computerisation of the immigration processes, which comprise the e-visa, exit and entry management and e-permits,” chief director of immigration Ms Respect Gono recently told The Sunday Mail.

According to the AfDB’s 2019 Zimbabwe Infrastructure Report, the country required about US$34 billion (at 2017 constant prices) for its infrastructure rehabilitation and development programme for the four main priority areas — transport, energy, water and sanitation, and ICTs — in the decade to 2030.

The transport sector requires the biggest chunk, at US$28,56 billion; followed by water and sanitation, at US$3,67 billion; and power, at US$1,14 billion.

The communications sector requires US$412 million. The AfDB said the US$34 billion figure does not include US$43 million that will be required for routine road maintenance over the same period. Funding for big infrastructure projects The Government is a critical financier of public works. However, given the scope of infrastructure projects that require financing and the timelines, the Government has also been looking at other options.

According to the 2024 Budget, the pipeline external loan financing for 2024 was estimated at US$330 million. The country was reportedly engaged in negotiations with the Broughton Capital Group (BCG) for a US$100 million facility for trade-related infrastructure development, as well as Dinosaur Merchant Bank for a US$125 million facility for infrastructure development.

The country was also in negotiations with ABSA, Standard Bank Limited Zimbabwe and Standard Bank Limited South Africa for the US$105 million Zimbabwe Healthcare Facilities Programme for the construction of healthcare centres and district hospitals.

Furthermore, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube said the Government was negotiating with the Arab Bank for Economic Development in Africa (BADEA), the International Fund for Agricultural Development (IFAD) and the OPEC Fund for International Development (OFID) for new financing
and lines of credit for local banks and institutions.

While public spending and external loans are vital financing tools for critical infrastructure projects, they can only go so far due to limited fiscal space and risks around indebtedness, respectively.

Market watchers say local institutional investors such as pension funds can play a big role in financing important infrastructure projects. Investment consultant Mr Gandy Gandidzanwa says investing in infrastructure can help pension funds meet their need for positive yields. “Infrastructure, as an asset class, has both the capital growth and income generation attributes — the right combination for long-term investing,” he said.

“Only very few other asset classes have those characteristics in combination — certainly not listed equities or conventional bonds. The growth is also in real terms.”

The Government has long appreciated the role played by local institutional investors in financing important projects.

In 2022 alone, Treasury accorded prescribed asset status on 13 projects valued at US$664 million. According to the country’s prescribed assets framework, local institutional investors such as pension funds and insurers are required by law to invest some of their monies into projects with prescribed asset status, thereby providing a channel for directing long-term funds into development.

Mr Gandidzanwa says Zimbabwe’s pension funds can do more to contribute to the economy. “As of December 31, 2022, our pension fund assets as a percentage of GDP were 10 percent,” he said.

“This is much lower than that of South Africa, at 83,8 percent; and the world average of 30,50 percent.”

Another funding option is for the Government to tap into diaspora remittances. Zimbabwe’s diaspora remittances are in excess of US$1 billion annually, accounting for approximately 16 percent of total foreign exchange receipts.

In its contribution to the 2024 National Budget in November last year, the business representative body, the Zimbabwe National Chamber of Commerce (ZNCC), suggested the creation of a diaspora bond to channel remittances towards infrastructure projects.

“Given the background of record receipts in diaspora remittances and the lack of external budget support, it will be prudent for the Government to introduce a diaspora bond in an effort to harness financing for mega infrastructural projects such as roads,” said the ZNCC.

Notwithstanding the ongoing huge critical infrastructure projects, numerous other smaller projects are being implemented as well.

According to the “Compendium of Projects implemented by the Second Republic (2018 to 2022)”, which was presented to Cabinet in March 2023, 6 869 projects had been undertaken across the country.

The projects varied in scope. They ranged from community-based empowerment and strategic projects to provincial and national ones.

Of the total, 4 984 had been completed, translating to a 72 percent completion rate.

Some of these projects are being funded under the devolution programme to ensure inclusive development, with 5 percent of the budget being allocated to local authorities each year.

Both big and small, completed and ongoing infrastructure development projects combine in the wider goal of accomplishing an upper middle-income economy status by 2030.

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