Zimbabwe requires more than US$33 billion for infrastructure projects over the next 20 years to turn around its economic fortunes, a senior World Bank economist has said.
In her presentation at a CCL and Econometer Global Capital-organised national business summit this week, Nadia Piffaretti said infrastructure development should be part of Zimbabwe’s two long term economic transformation objectives, namely restarting the process of economic transformation and reintegrating regional and global financial markets.
Piffaretti said US$11,3 billion was required for electricity generation-related projects alone while another US$13,4 billion should be allocated towards transport infrastructure development in the coming two decades and have a smoothed average annualised gain over the investment time horizon, known as a compound annual growth rate, of 6, 2% and 1,3% respectively.
Another US$6,8 billion and US$1,8 billion should be channeled towards telecommunications, water and sanitation infrastructure, with anticipated compound annual growth rates of -0,2% and 1,6% respectively.
Piffareti said the new investments and other key reforms should revamp economic growth that has been fading after the economy started to rebound in 2009 following a decade of hyper inflation and stagnation.
She said real GDP growth had exceeded 10% in 2010 and 2011 but fell to below 5% in 2013.
According to the World Bank economist’s projections, Zimbabwe’s real GDP growth rate is expected to remain below 5% until 2016.
Piffaretti said the country’s manufacturing, agriculture and mining sectors remained key to economic transformation.
She however said short term stresses in manufacturing may compromise manufacturing Zimbabwe.
“Liberalisation of imports has increased stress on firms created through import-substitution policies, while export oriented firms may not be mature enough to vigorously react to liberalisation (and) most firms remain stressed, and largely focused on the domestic market,” she said.
On agriculture, Piffaretti said the sector had potential for rapid recovery, long term growth and employment generation and transition to rapid agricultural growth if the current super-cycle of international prices continued.
“The new small-holder sector requires temporary stronger support to unlock its potential. Production remains constrained by the need to adapt to the new production structure and finance the necessary investments in a context of still very low domestic savings”.
A 2012 World Bank report quoted by Piffaretti notes that given lack of exploration in mining, infrastructure weakness, and current persisting uncertainty, there might be no major increase in activity in the medium run.
She said: “In the baseline scenario we project a maximum of US$5 billion investment by 2018. Most of production volume would expand in gold and coal. About 5000 new jobs would be created. In the active policy scenario, investment could reach US$15 billion, with 30,000 jobs created. Iron, gold, coal and chrome have higher potential of absorbing new investment.”
In another presentation, economist John Robertson said government needed to present a brand new set of promises to the people of Zimbabwe and to the investors it desperately needed in order to make a rapid recovery.
He said the new dispensation should only accept ideas that work.
“Should the old policies survive the new dispensation? No. We have seen years of failure and economic shrinkage under these old policies,” Robertson said.
He said the country should promise to create a competitive investment environment that assured every investor that political risks would not be added to the business risks they already faced.
“We should promise everyone involved in business activities that the same set of rules apply to everyone, and that no exceptions will be made in exchange for favours or little brown envelopes and we should promise to respect their civil rights and their property rights,” Robertson said.
“If we make these promises, and keep these promises, Zimbabwe will be quickly placed upon an impressive growth path and the country will soon be benefitting tremendously from the country’s most valuable resource. And the country’s most valuable resource is not its farmland or its mineral reserves.”