Innovative financing key to infrastructure development

Lazarus Sauti

The African Development Bank (AfDB), a multilateral development finance institution established to contribute to the economic development and social progress of African countries, believes Zimbabwe needs to spend US$2 billion on infrastructural development a year for the next 10 years in order to attract investment and lift citizens from poverty.

“Zimbabwe’s current infrastructural deficit is currently unsustainable. The country requires US$14 billion for infrastructure development by 2020. This means the government needs to spend US$2 billion a year for the next 10 years to cover the infrastructural gap currently bedeveling the country,” said the AfDB.

Mateus Magala, AfDB resident representative, also says there is a huge infrastructure gap in Zimbabwe, a fact shared by Finance minister, Patrick Chinamasa, who always asserts that “his challenge is to address the gaps that exist in the country’s infrastructural framework, which include power deficit, water reticulation challenges, railways, roads as well as Information and Communication Technology (ICT).”

“Of the current requirements, power infrastructure needs US$1.2 million, water and sanitation call for US$427 million, transport infrastructure requires US$218 million, ICT needs US$475 million and irrigation demands US$47 million early,” Magala explained.

Magala believes the infrastructure gap calls for strong investment plans, strategies as well as policies to attract the required savings in the infrastructure sector.

He, therefore, urges Zimbabwe to raise additional public-private sector as well as international funding, which, when coupled with prudent policies, would allow the country to create employment, alleviate poverty and improve the quality of life.

“Zimbabwe should take innovative and bold approaches as well as identify game-changing projects and programmes that are commercially viable to attract investors.

“Innovative financing – a range of non-traditional mechanisms to raise additional funds for development aid through ‘innovative’ projects such as micro-contributions, taxes, public-private partnerships and market-based financial transactions – is key to infrastructure development and unlocking quality growth for Zimbabwe,” Magala said.

Desmond Matete, Director of Infrastructure at the Infrastructure Development Bank of Zimbabwe (IDBZ), says infrastructure is the key economic enabler, thus, Zimbabwe should look for innovative solutions to address infrastructure challenges if the country is to embrace and promote trade, innovation and social cohesion.

Economist Christopher Mugaga says: “Financing infrastructure is not a one-size-fits-all exercise; therefore, it is crucial for Zimbabwe to develop a diverse menu of options to access capital.

“With new investment, infrastructure can be leveraged to spur new economic and social development well into the future.”

Social commentator, Simbarashe Namusi, believes the odds and ends of options must include domestic tax reforms as well as competitive banking systems.

“To boost available funds and effectively underpin investment in infrastructure, the country needs to reform its domestic tax systems – it needs to increase tax revenues. Zimbabwe needs to make banking systems more competitive.” he said.

Namusi also believes Diaspora bonds present an untapped opportunity to mobilise resources; therefore, he urged the government not only to attract engineering skills back to the country particularly Zimbabweans in the Diaspora, but lure the Zimbabwean Diaspora to invest in the country.

“Money from the Zimbabwean Diaspora can be used to close the infrastructure gap in the country. The government needs to retain skills from Zimbabweans in the Diaspora as well as entice them to invest in the country. For this to materialise, policy decision makers need to address our investment climate first by instituting investor friendly policies,” he said.

Namusi added: “The government also needs to seriously deal with negative perceptions about the country if it is to lure the Zimbabwean Diaspora and other investors.”

Vince Musewe, an economist, says in order to attract investment and to close the infrastructure gap, better planning and coordination of government policies and strategies as well as projects on infrastructure development must be prioritised.

“Making Zimbabwe an attractive investment destination and attracting foreign investments in infrastructure development should be the key mandate of the government. What is required is political will to establish and implement friendly strategies and policies that are not detrimental to investment,” he said.

Namusi also advocates for policy certainty. He said domestic and foreign investors need confidence and assurance that their private and intellectual properties will be protected. 

“Policy certainty is needed to give local, regional and international investors the confidence to invest in the country. Remember, the foundation for a growing economy like ours is confidence.

“Domestic and foreign businesses need assurance that government policies will not only be predictable, but implemented consistently. The country needs predictable policies investor friendly policies to attract more investment players and close the infrastructure funding gap,” he said.

Matete, says a Sovereignty Wealth Fund – a state-owned investment fund investing in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such as private equity fund or hedge funds – if well designed as well as implemented, can be an important source of finance for Zimbabwe’s infrastructure.

“Zimbabwe should be able to raise money to close the infrastructure gap through the Sovereign Wealth Fund, Sovereign Wealth bonds, financiers in the Diaspora and the public private partnerships,” the infrastructure expert said.

Namusi says private organisations in Zimbabwe must provide the country with financial support to improve infrastructure and transform the country socio-economically.

“There is a noticeable absence of private sector engagement in infrastructure development. Private sector players need to explore the formulation of innovative financing models and engage more with the government to close the infrastructure funding gap in the country,” affirmed Namusi.

Poor infrastructure, without doubt, is slowing the social and economic transformation in Zimbabwe, a country badly in need of investments; therefore, the government, development partners as well as stakeholder in finance and economic planning must join hands and embrace innovative financing in infrastructure development to stimulate socio-economic development in the country.