Zimbabwe extends begging bowl
ZIMBABWE is seeking financial support from China and India to rehabilitate and modernise its infrastructure.
The investment-starved southern African nation requires at least $20 billion to refurbish dilapidated infrastructure and create new capacity to meet existing and future demand for its growing population — approximately 16 million, according to official figures.
The infrastructure — crucial to the country’s economic revival efforts, as it reduces the cost of doing business and is a key enabler of regional integration — is in bad shape after decades of neglect.
July Moyo, Local Government minister, said while it was prudent to mobilise domestic resources for infrastructure development, the country was currently unable to raise funds alone, hence the decision to court the deep-pocketed Asian financial institutions.
“We are looking at China Eximbank and India Eximbank to come and help in the country’s infrastructure development,” he said.
“In the old days, we used to rely on the World Bank, the International Monetary Fund, African Development Bank, among others for infrastructure support, but now, the private sector is also coming in large numbers and we are looking at them,” he said.
Investment in infrastructure is critical in advancing agriculture and fundamental to human development, including health and education services delivery to the poor people.
Experts argue that poor infrastructure is a barrier to accelerating growth and poverty reduction in many African countries.
Studies have shown that increasing the stock of infrastructure by one percent can add up to one percent to gross domestic product.
Moyo said a combination of foreign direct investment and domestic resources will help Zimbabwe quickly close the infrastructure gap with regional countries.
“Infrastructure development is a catalyst for economic development and business cannot take place unless Zimbabweans start investing in infrastructure, which includes built-up environment, roads, water sewage and electricity among others,” he said.
Zimbabwe’s infrastructure and construction industry is projected to grow at a consistent rate of 4,3 percent for the next eight years.
BMI Research (BMI), a Fitch think-tank, recently noted that the net value of Zimbabwe’s infrastructure and construction sector would nominally grow to $800 million by 2026, with China earmarked to implement the bulk of the projects “due to large existing commitments”.
“Zimbabwe’s unfavourable business environment is likely to weigh on its construction sector growth, with the country set to remain one of the smallest construction markets in Sub-Saharan Africa through 2026. Chinese investment is likely to be the main supporter of industry growth over coming years due to large existing commitments.”
“The considerable risk associated with investment in Zimbabwe informs our forecast for the nominal industry value to reach $800 million by 2026, suggesting that the country’s construction markets will remain as one of the smallest in the world,” BMI said.
With Zimbabwe’s infrastructure development gap widening, the African Development Bank (AfDB) has projected that the continent loses two percent in potential growth annually, due to dwindling investment towards key construction projects.
The projected flat growth margins of 4,3 percent from 2018 to 2026 will be sustained by Chinese investment, with the Asian country already undertaking key infrastructure projects in Zimbabwe ranging from power generation to dam construction.
Currently, China International Water and Electric Corporation is constructing the Gwayi-Shangani Dam, which will have capacity to generate 6 megawatts with a holding capacity of 635 million litres once complete.
Sino-Hydro, a Chinese firm, is currently undertaking a power generation expansion project at Kariba which is expected to contribute 300MW on the national electricity grid.
The research firm largely attributed the dwindling investment towards infrastructure development due to Zimbabwe’s “risky” environment.
“Zimbabwe is ranked one of the riskiest markets globally to invest in infrastructure in our Infrastructure Risk/Reward Index, coming in 97th place out of 105 markets.
“In Sub-Saharan Africa, it comes in 16th place out of 18 markets, with its score of 29, seven out of 100, well below the regional average of 42,1,” said BMI Research.
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