A RECENT International Monetary Fund (IMF) Board Report on Zimbabwe highlighted erratic power supplies as a threat to economic growth.
The same sentiment was echoed for the rest of Africa at a United Nations sponsored conference on energy recently attended by President Robert Mugabe. All resources such as good quality coal, God-given gorges such as Batoka for hydropower, plenty of sunshine for solar energy and even uranium for nuclear power, are abundantly available.
International finance markets, for a long time now, have had the necessary resources, again, in abundance.
All that Africa, as individual countries such as Zimbabwe, or trading blocs such as Sadc needs to do, is put bankable power generation projects on the table.
Investing in infrastructure, such as power generation and railroads, has a direct effect on economic growth and international competitiveness. Empirical evidence shows that for 1% growth in a country’s per capita GDP, its infrastructure stock has to grow by 1%.
Therefore, for our GDP per capita to grow by double digits over the next decades, our investment in infrastructure stock should match, point for point, our expected growth rate.
Thus our Zimbabwe 2013 National Budget should at least be setting aside half a billion dollars for infrastructure stock, $200 million of which should be directed at the power sector. And if we want to take growth into double-digit territory, the numbers should double to a billion dollars per year, requiring $5 billion over the life of the Medium Term Plan (MTP).
According to the IMF and World Bank publication, Finance & Development, issue of December 1997: “In order to facilitate greater private sector participation in infrastructure projects, governments need to concern themselves with the following issues:
- Chamisa under fire over US$120K donation
- Mavhunga puts DeMbare into Chibuku quarterfinals
- Pension funds bet on Cabora Bassa oilfields
- Councils defy govt fire tender directive
Keep Reading
Transparency of process: Private sector investments opportunities are conditioned on the existence of specific government policies and programmes that encourage private sector entry and a transparent system of evaluating of bids and awarding contracts. Press reports indicate that our State Procurement Board (SBP) is having a problem on this front. The relevant Procurement Act needs revisiting to ensure fairness and transparency in the State’s procurement of services and goods.
Competitiveness of bids: Transparency and public accountability are best achieved using a competitive bidding process to select contractors for infrastructure projects, as should indeed be the case in all State purchases, joint ventures and public-private partnerships. The State should avoid “negotiated deals”, which have sprouted in the mining sector.
Stable policy regime: The draconian indigenisation policy, which is further selectively applied, is an example of what not to do. It drives away capital leaving nothing or little to indigenise.
Because of legacy issues, and to attract long-term finance, the multi-currency regime should be given a shelf life of at least 30 years, not the five in the MTP. The local currency can be reintroduced after 10 to 15 years in a measured way, in a multi- currency environment.
Appropriate allocation of risk: The government’s Medium Term Plan calls for the rule of law and the upholding of property rights. The government must be seen to walk the talk. The 51% local shareholding is another issue if the locals are not bringing cash to the project. It simply means the foreign partner carries all the commercial risk. This places Zimbabwe at the bottom end of investors’ choices.
Government guarantees and credit enhancement: Bilateral and multilateral guarantees and credit enhancements are critical for the successful financing of infrastructure projects. Restoring our voting rights at the IMF and servicing our $10 billion debt should be taken as high priority. Indeed the MTP highlights this, and what is needed is the political will. The highly-indebted poor country classification should now be sought with diligence, and the unpalatable medicine taken.
A bold government would have done any of the following:
Float a tender to bring the generating capacity to above 80% in exchange for a shareholding in Zesa or its generating subsidiary. Double the capacity at Hwange, and bring Gokwe on stream, by bringing in an equity and technical partner such as Eskom, with the added advantage that surplus power can easily be sold to the South African utility.
But instead, as a sign of less than enthusiastic commitment, government in its plan offers the Harare, Bulawayo and Munyati power stations to the private sector. These unfortunately are largely inefficient and obsolete. A more committed approach, especially by the politicians, is required, if economic growth is to be assured. On a positive note, judged from interviews they have given the Press recently, the mandarins in the Ministry of Economic Planning are aware of what to do.
