Status Infrastructure in Zimbabwe

Zimbabwe Infrastructure Investment Conference 22nd and 23rd July 2010 London Eng. Martin Manuhwa , FZwIE Vice President of the World Council of Civil Engineers (WCCE). Chairman: WCCE Education, Training & Capacity Building Past President of the Zimbabwe Institution of Engineers (ZIE).

Day 1, Session 1 The Status of Infrastructure in Zimbabwe: An investor’s opportunity for rehabilitation and development through Private Public Partnerships (PPPs and PFIs).

Presentation Outline Introduction Back-ground and Opportunities for Investors Status of Infrastructure in Zimbabwe Water and Sanitation Infrastructure Energy Infrastructure(Grid Power & Renewables) Transport Infrastructure Information and Communication Technologies Financial Engineering Instruments for Investors Possible Zimbabwean PPPs & PFI Models Recommendations – Implementation Action Plans Conclusion

The engineering team provides infrastructure and services for quality of life Sanitation Potable water

Or………….. a world without engineers

Introduction “ We cannot stress the primacy of relevant infrastructure to bring investment into Africa and then accelerate growth.” – The late Dr. Mwanawasa former President of Zambia. The infrastructure, Construction and Engineering Industry is the barometer of the economy as it contributes massively to the GDP of our country. A breakdown in infrastructure especially running water can lead to health crises like the 2008 cholera epidemic. Stakeholders from all over the world to come up with practical ways of financing infrastructure to stimulate, grow and develop the Zimbabwean economy.

Introduction Package for investors, government and other stakeholders to promote the reconstruction and development of infrastructure, skills and technology transfer, and human capital development. The economic decline that faced Zimbabwe in the last decade meant the infrastructure has dilapidated due to inadequate maintenance and renewal due to lack of funding, exodus of skilled personnel among other reasons. Zimbabwe is, therefore, in dire need of investment, both in terms of financial and human resources. Zimbabwe’s infrastructure is crucial for poverty alleviation and the attainment of United Nations (UN) Millennium Developments Goals (MDGs). A good infrastructure is an enabler and stimulus for investment, competitiveness and economic development.

Background and Opportunities for Investors Priority infrastructure sectors, viz ; Water and Sanitation, Transportation, Energy and Information Communications and Technologies (ICTs) will be discussed in this paper. These four areas are seen as key to the prosperity of the country as well as being key enablers for mobilising the much needed foreign investment. This paper will review the current status of Zimbabwe’s infrastructure, develop polices, strategies and action plans to address the challenges facing the financing of infrastructure. A clear roadmap for the broad rehabilitation, construction and development of infrastructure will be proposed.

General Status of Infrastructure in Zimbabwe The macroeconomic conditions during the last decade and the decision to prioritize current expenditures led to a deterioration of infrastructure. Natural step is to work on encouraging the private sector to take part of the responsibility of investing in infrastructure. However, before taking steps toward privatization or other types of private sector participation, a necessary condition is the review of the legal and regulatory framework for service provision to create the right incentives for private investment – An action GoZ is undertaking with stakeholders e.g. WB, AfDB, ZIE, CZI. .

Water and Sanitation Infrastructure In the 1980s and 1990s, Zimbabwe embarked upon far-sighted policy and strategy reforms and was a regional leader of innovations in the rural water and sanitation sector. Since the onset of the economic decline in 1999, access to water and sanitation services has been steadily declining. Urban and rural centres that previously registered nearly 100 percent service coverage are experiencing the steepest decline in water quality and production, now estimated to be 30 percent below requirements.

Water and Sanitation Infrastructure Against the target for the rural water supply set at 80 percent coverage of safe water points operational at all times, the coverage peaked to 75 percent in 1999, but has since declined to 70 percent in 2004. In rural areas, lack of repairs and spare parts have put many boreholes out of service and poor households have returned to using unsafe sources. The key institutions for the coordination of water and sanitation sector in rural areas (the National Action Council) have virtually collapsed due to insufficient resources. It is estimated that approximately US$10bn is needed to rehabilitate Zimbabwe’s water and sanitation infrastructure. Harare alone needs in excess of US$100m to refurbish its bulk water works.

Source: Research and Data, Zimbabwe National Water Authority, 2006. Water and Sanitation Infrastructure

Energy Infrastructure The electricity sector faces a chronic shortage of supply . Most of the generation, transmission, and distribution assets of the Zimbabwe Electricity Supply Authority (ZESA) are in poor condition, and ZESA’s financial condition is not at its best. ZESA generates 1100–1200 megawatts (MW) of effective supply to satisfy a nominal demand that averages 1500 MW and peaks to 2200 MW (this is a suppressed demand due to low capacity utilisation).

Energy Infrastructure There has been no major investment in power generation infrastructure in Zimbabwe since 1986. Between 1996 and 2006 the country depended on imports for 35 percent of its energy requirements and 23 percent of its power requirements, but foreign currency shortages and lack of firm power contracts have forced ZESA to resort to load shedding. The maintenance of transmission substations and lines is satisfactory, but the overloading in the network is creating bottlenecks for regional power trading. A significant number of transformers are old and overloaded.

Energy Infrastructure Part of the reason is that output of the coal-fired Hwange power plant is extremely unstable, and dips as low as 50MW on occasions, averaging 500MW. Apart from improving generation capacity, there is scope for demand management. Average consumption of 400 kWh per month is high by international standards. ZESA is performing demand management programs that go from load shedding to recent practices related to changes in consumption patterns (replacement of high-consumption bulbs with low-consumption bulbs) and consumer education

Energy Infrastructure Petroleum . For many years, the parastatal National Oil Company of Zimbabwe (NOCZIM) was responsible for providing petroleum products to the Zimbabwean economy. Recently, it has begun to compete on an equal footing with private companies, both in the retail and wholesale markets. NOCZIM has a 50 percent stake in one of the two pipelines that are the cheapest way to import fuel into most of Zimbabwe.

Energy Infrastructure Green Energy and Renewables . Biogas Heat Recovery DSM and Energy Efficiency Solar Other sources Infinity potential

Transport Infrastructure - Railways The railways sector is under the direct control of the Minister of Transport and Infrastructural Development and is operated by a parastatal, the National Railways of Zimbabwe (NRZ). The company renders standard services and also has a public service obligation (PSO) on behalf of the Government. Part of the network, the Bulawayo to Beitbridge Railway (BBR), which began in 1999, is operated by the private company New Limpopo Projects Investments.

Transport Infrastructure - Railways Some private operators also use the rail infrastructure to operate business. This sector has deteriorated, mainly in NRZ’s technical, operational, and financial performance, due to the economic situation and also to the lack of compensation of the public service obligation.

Transport Infrastructure - Road Zimbabwe’s total road network (88,330 km) is comprised of 18,430 km national roads, 8530 km urban council roads, 26,000 km District Development Fund roads and 35,370 km rural district council roads. The roads play a major role in service delivery, regional integration, trade expansion, and rural development. It is estimated that 24 percent of the network is currently in “good” condition, 36 percent is in “fair” condition, and 40 percent is in “poor” condition.

Transport Infrastructure - Road Different Government departments manage the road network of Zimbabwe. The Department of Roads in the Minister of Transport and Infrastructural Development is responsible for primary and secondary roads. The District Development Fund (DDF) and Rural District Councils are responsible for the tertiary roads. Urban Councils, under the Minister of Local Government, Urban and Rural Development, are responsible for urban roads. Inadequate funding to road authorities over the last few years has led to a lack of maintenance and rehabilitation, and hence deterioration of road infrastructure. The Roads Bill (2001) instituted the Road Fund, managed by the state agency Zimbabwe National Road Administration (ZINARA), with the purpose of increasing funds for maintenance and expansion (tolls, licenses, fuel levies

Transport Infrastructure – Airways and inland waterways Airways: Air-Zimbabwe is sole operator. Has potential to seal investment agreements with interested partners if the necessary regulatory framework is put in place. Inland Waterways: Minimum potential due to lack of large water bodies. Kariba and the other lakes have potential The potential of a canal from the Indian ocean to the borders of Zimbabwe, Botswana and Zambia has great economic gains the affected countries for they will cease to be water locked.

Information & Communication Technologies (ICTs). Telecommunications . The telecommunications sector has been the most dynamic of all infrastructure sectors in the Zimbabwean economy. The Government opened it to liberalization and competition in a context of dramatic technological changes worldwide during the last 15 years. The parastatal TelOne operates the fixed line network, and the parastatal NetOne competes with EconNet and TeleCel in the cellular network. All of them are regulated by Postal and Telecommunications Regulatory Agency of Zimbabwe (POTRAZ). The recent macroeconomic crisis contributed to slow down the process of technology adoption for both TelOne (with obsolete fixed telecommunications technology) and cellular

Range of Zimbabwean PPPs Models

Range of Zimbabwean PPPs Models Service contracts Mgmt. contracts Leases Concession BOT BOO Divestiture Increasing private sector risk, responsibility, and financing

Possible Zimbabwean PPPs Models

Recommendations A numbers and needs study to determine the gaps in human and financial capital necessary for Zimbabwe to develop, sustain and maintain basic infrastructure. An Infrastructure Scorecard for Zimbabwe must be initiated to advise policy makers on best practices and international trends in the development of our infrastructure. ZIE, ECZ and other professional bodies to adopt the ICE State of the Nation Infrastructure Scorecard, ASCE Scorecard etc

Recommendations A Zimbabwean Diaspora Skills for Rehabilitation, Reconstruction and Development Desk must be established in the Office of the Deputy Prime Minister and will work with a team of resident professionals on targeted projects. An Integrated Infrastructure Master Plan should be funded and carried out using best practices in Zimbabwe. This will identify the prioritised viable projects to be presented to investors at a round-table. The study will in addition, outline the information required to construct a Project Information Memorandum (PIM) that will take a project from feasibility to bankability and pre-implementation. Priority projects will be selected and packaged in a bankable projects implementation memorandum ready for investor up-take.

Recommendations The PPP Guidelines for best practice requires. In particular: (i) creation of a specialized PPP Unit, (ii) standardized procedures in the PPP guidelines to achieve fair, transparent, and competitive selection of providers; (iii) homogenised and aligned principles of line ministries to prepare a coordinated action plan regarding PPPs; and (iv) Scope of the guidelines must go beyond procurement.

Recommendations The PPP regulation must set three tests for any project to meet, namely: Affordability Value–for-money Appropriate risk transfer It is essential to understand the impact of project risks as this can affect affordability and efficiency of a project both for public and private sector parties. Risk matrix, usually constructed during feasibility study stage, must identify risk, assess impact, assess likelihood of risk occurring, calculate value, do a preliminary allocation of risk to party best suited to manage it and identify strategies for mitigation.

Conclusion Zimbabwe is ready for investment, it is a sleeping giant of Africa, has great potential, wealth and the highest literacy in Africa. The time has come to develop an integrated, generic, appropriate, Effective &Comprehensive set of policies, strategies and related guidelines related to Infrastructural Development Programmes for Investments in PPPs and PFIs that can be promoted and implemented without delay to resuscitate Zimbabwe’s economic dominance in Africa.

THANK YOU FOR YOUR ATTENTION!!

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Status Infrastructure in Zimbabwe

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