Zimbabwe faces a huge funding gap for its infrastructure needs, a development that could scuttle efforts to woo investments into the struggling country, forcing it to open up opportunities for public private partnerships (PPP) with South African and other international groups.
Its struggling economy has been hit by power outages and dilapidated rail and road infrastructure.
It has recently opened up its energy production sector to private investors.
Additionally, President Robert Mugabe’s government has contracted South Africa’s Group Five to rehabilitate and dualise a road linking its Plumtree border with Botswana and Mutare, nearer to its border with Mozambique.
The road project, worth $207 million (R2.3 billion), is being funded by the Development Bank of Southern Africa (DBSA).
Executives from DBSA, South Africa’s Public Investment Corporation and Transnet recently visited Zimbabwe and knowledgeable sources say the government is keen to rope the groups into infrastructure investment projects in the country.
“The visit by the South African executives is a major show of interest to invest in infrastructure which we desperately need to improve. There has also been strong interest from other investors in energy and rail projects,” said one of the sources.
Infrastructure bottlenecks have been cited as a major obstacle to attracting investment for the mining and manufacturing sectors, which are struggling for viability, with capacity utilisation sagging below 40 percent.
A senior government official said on Thursday that the country required more than $460m to bring its rail infrastructure back on line.
This money, which has not been forthcoming from investors who are worried about its business climate, could only be secured from private public partnerships.
“We believe that for significant progress to be registered there is scope for PPPs in the road transport sector. There is work in progress to put a legal framework for the PPPs,” said Munesu Munodawafa, permanent secretary in the Transport Ministry, in an address to a mining conference held in Harare last week.
He said the country’s national roads authority was “anticipating” to mobilise about $102m for this year.
However, “when you look at $102m compared to about $5bn that you need for total intervention, it still leaves scope for PPPs”.
Zimbabwe is starved of fresh financing to boost its economy which is now expected to grow by 3.1 percent this year.
However, its debt overhang is hampering its ability to borrow more.
The International Monetary Fund has said that it will not avail any new credit until the country clears its arrears.
The fund is set to approve new economic reform policies for the country, which are expected to gauge its ability to “live within its means” as it is squandering half of its revenues on state spending on wages and other obligations.
This has left the infrastructure sector starved of much-needed funding.
The energy sector is in urgent need of rehabilitation and new power generation projects, with energy shortages forcing a decline in productivity.
“There have been no major capacity expansion projects” to meet the growing demand, said Thembie Chehore, the energy research associate at Frost and Sullivan.
The Zimbabwe Power Company recently signed deals to expand Kariba power station but this is not expected to bring an immediate end to the country’s power woes.
“A major problem constraining power supply in Zimbabwe is that the ageing power stations are in need of rehabilitation, maintenance and upgrades, which has led to recurrent interruptions in power supply,” Chehore said.
Zimbabwe’s infrastructure gaps have resulted in high operating costs for the mining sector, which is now faced with a 1.9 percent contraction, as miners have to turn to expensive road haulers to move ore, raw materials and matte for processing in South Africa, owing to the dilapidated state of the railways.
Power shortages have been dire even for the agriculture sector.
Further contraction in mining and agriculture could dent prospects for economic recovery, economists say.