PPPs urged to anchor infrastructure development
EQUITIES and economic research firm Akribos Capital has said public-private partnerships (PPPs) should take the centre stage as the main source of funding in infrastructure development to ease pressure on the government.
This comes as Zimbabwe’s infrastructure development has witnessed remarkable growth as several government projects spanning various sectors such as transport, agriculture, energy, and mining have moved gears up. But the investment by the Government alone remains inadequate to cover all infrastructure needs.
Important national goals also depend on different forms of critical infrastructure. The economy needs reliable infrastructure to connect supply chains and efficiently move goods and services across borders. Infrastructure connects households across metropolitan areas to higher quality opportunities for employment, healthcare and education, among others.
Akribos in its second quarter 2022 report maintained that construction and real estate sector growth is likely to be in line with treasury estimates of 17.40 percent and 1.70 percent in 2022, respectively.
“All these infrastructure development projects have presented growth opportunities for listed and unlisted entities in the construction sector to participate in the sector growth and thousands of jobs have been created for locals.
“However, the worsening inflation and exchange rate depreciation have continued to threaten the viability and sustainability of these long-term infrastructure development projects, given its impact on US$-denominated materials pricing,” it said.
Among other projects, the government has dualized and rehabilitated most highways and urban and rural road networks, which were declared a state of disaster in 2019.
In addition, the impact of climate change has also seen the government move with speed in dam construction as part of its efforts to boost agriculture production.
Akribos said that in May 2022, the Government responded by increasing the ratio of partly US dollar payments to contractors undertaking various public infrastructure programmes from 30 percent to 50 percent to cushion constructors and curtail the amount of liquidity flowing into the economy.
“This was a commendable move by the government in reducing demand for the US$ which was causing a faster devaluation of the Zimbabwe dollar.
However, on the other hand, the lack of adequate long-term financing presents a downside risk to the completion of these projects,” the research firm said.
It added that the government has since resorted to using short-term financing which introduces rollover and interest rate risks and can generate economic costs such as high inflation.