CIFOZ Congress 2018
Presentation by
Infrastructure Development Bank of Zimbabwe
(IDBZ)
Introduction
The Presentation is in two parts:
Part A: Introduction and Mandate of IDBZ-
1 Mandate and key sectors:
2 Infrastructure funding requirements
3 Funding Gap
4 Comparisons with other African countries
5 Potential resources in the African context
6 What Zimbabwe need to reverse
Part B: Operational issues-
7 Role of IDBZ in infrastructure Projects
8 Implementation and Funding arrangements/options
9 Examples of projects
10 Opportunities through the Value Chain.
PART A
IDBZ: Mandated to facilitate infrastructure development through resource
mobilisation and capacity building in the following Sectors:
Energy Transport Water, Irrigation & ICT Housing/Social Infrastruc
Sanitation
Electricity Backbone Land development
Roads
Generation Dams Water & Sewer
Airports Distribution
Transmission Irrigation Roads & drains
Railways infrastructure
Lines Water Electricity
Marine
Hydro power pipelines reticulation
Solar Accommodation
Magnitude Of Financing Requirements For Infrastructure In
Zimbabwe- Minimum Gap Analysis
Energy: Transport Water & ICT Housing/Social
US$4.3 B US$5.6 B Sanitation US$0.1 B Infrastrcuture
-Power plants -Roads US$4.2 B Communicatio More than 1.2 Million
-Transmission n systems Units
-Airports -Dams
lines -Telephones -Water & Sewer
-Rail -Irrigation Lines -Link roads
-Renewable
Urban link Treatment IC
-Internet Electricity
Energy
roads Plants Services Water
-Solar projects
-Sewer Student/Staff
accommodation
Total US$33 B in two decades. Translating to annual gap of US$1.7 billion. The Gap
has since widened due to national budgetary constraints
Researches including IMF agree that there is a positive & significant relationship
between infrastructure expenditure and output, growth and productivity.
Infrastructure funding levels against the
requirements
o Since6 2010 to date the country has been allocating between US$200
Million and US$ 500 Million of public resources towards infrastructure
against a financing requirement of over US$1.7 billion leaving a huge
funding gap of over US$1.2 billion per year.
Actual Expenditure World Bank Estimate
1.7 B
1.7 b 1.7B 1.7B 1.7B 1.7B 1.7B 1.7B
Ideal Trend to close the gap
0.5 Bln
0.3 Bln
0.3 Bln
0.3 Bln
0.2 Bln
0.2 Bln
0.1 Bln
0.0 Bln
2009 2010 2011 2012 2013 2014 2015 2016
Comparison between Zimbabwe and selected African countries in
terms of infrastructure financing Infrastructure Consortium for Africa (ICA) 2014a
7 • Top performing countries (e.g.
South Africa, Lesotho, Botswana)
allocates around 7.5% of their GDP
to infrastructure.
• Zimbabwe and countries such as
Sierra Leone allocate around 1.2%
of GDP to infrastructure.
• There is a need to reverse this
trend.
• Zimbabwe should aim to allocate
well above 6% of its GDP towards
infrastructure in order to close the
existing gap.
• Positive that the Transitional
Stabilization Programme aims at
increasing the share of resources
allocated towards infrastructure.
Magnitude of resources available for in Africa that
Zimbabwe may take advantage of if conditions are
created?
Possible Funding sources Magnitude (US$)
Official Development Assistance (ODA) Over 50 billion (But dwindling)
FDI Over 54 billion
International reserves 400 billion
Diaspora remittances Over 66 billion
Private Equity Markets Over 30 billion
Potential earning from minerals Over 168 billion
Lines of credit from banking sector 60 billion
Pension Funds Over 300 billion
Variables that makes Zimbabwe to be perceived as too risky.
(Evidence from Africa Competitiveness Report- 2017
9 to (30) with (o) representing best environment and (30) representing worst case scenario.
on a scale (0)
25
Policy instability challenges 24.6
Access to Financing challenges 14.5
Corruption related challenges 12.7 20
Inefficient Government Bureaucracy 11.2
Inadequate supply of infrastructure 10.1
15
Restrictive labor regulations 6.4
Tax rates 5.1
Foreign currency regulations 5.1 10
Government Instability 3.3
Insufficient capacity to innovate 2.4
5
Tax regulations 1.8
Inflation 1.3
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PART B
The Role of IDBZ in Infrastructure Projects
I. Project Preparation and Packaging:
Technical assistance on Feasibility Studies, project structuring, arranging project preparation
finance, preparation of marketing/tender documentation (EOIs, RFPs, PIMs, etc.)
II. Project Financing:
Determination of suitable financing models, resource mobilization, negotiating funding
terms/agreements with investors, administering funding arrangements, etc.
III. Procurement:
The Bank’s procurement system is geared towards delivering high quality and value for money goods,
works, and services through sustainable cost savings. It seeks to promote fairness, best corporate
governance practices and endear public confidence.
IV. Project Implementation Monitoring:
Contracts management & administration: Validation of Contractor Certificates, handing Disbursements to
Contractors/Suppliers, Project Inspections and Progress Reports, etc.
Implementation/Funding Arrangement Options
Projects to be implemented through SPV jointly owned
Joint Venture by the two parties
IDBZ constructs and operates facilities under a
BOT
concession over a period of time
Council sells land to the Bank (particularly for housing
Outright Sale projects)
Loan Certain revenue streams ring-fenced to repay the loan
Project Development & Preparation
Fund (PPDF)
I. The Bank recognizes that the lack of bankable projects
remains a major challenge which militates against efforts to
attract investment towards priority infrastructure projects
II. In response, the Bank established PPDF to finance project
preparation and development processes such as layouts,
designs, EIA and Feasibility Studies
III. Started off with seed capital of US$2.5m but now increased
to US$10m
Examples of Projects Being Undertaken
ProjectPhase Description Project Cost (US$) Status
Clipsham Views – Masvingo Servicing of 704 low density 6,700,000 Completed
stands
Bulawayo Students Student Hostels (1032 beds) 12,000,000 Construction in progress
Accommodation Complex and commercial centre
ZETDC Prepaid Metering Installation of 800,000 45,000,000 Completed
prepaid meters
Victoria Falls WASH Water and Sewer 12,000,000 Resource Mobilisation
augmentation
New Marimba Housing Servicing of 340 residential 3,600,000 Completed PHASE 1
stands
Empumalanga West Servicing of 2,300 6,000,000 Construction in progress
Housing and Sewer residential stands and
Treatment Plant rehabilitation of sewer
treatment plant
Chiredzi WASH Water and Sewer 9,700,000 Feasibility Studies in
Augmentations progress
Kariba Housing Servicing of 1560 mixed 15,000,000 Construction in progress
density stands
Infrastructure Value Chain
Finance (IVCF)
About IVCF
Infrastructure value chain financing is the provision of financial services and products to the energy,
water and sanitation, transport, ICT and housing sector players to address growth constraints.
Overall Objective
The overall objective of this product is to promote infrastructure development in Zimbabwe by
enhancing the capacity of key players in the infrastructure value chain to improve their effectiveness
and efficiency in their operations.
Specific Objectives
to provide working capital and capital expenditure/ asset finance for players in the infrastructure
value chain.
to support players in the infrastructure value chain by providing bank guarantees (bid bonds,
performance bonds, advance payment guarantees, maintenance/ retention bonds).
to provide advisory services to players in the infrastructure value chain (business plans and funding
proposals).
Infrastructure Value Chain
Finance (IVCF) cont’d
Eligible / Qualifying projects
Support will be rendered to players in the energy, water and sanitation, housing, transport and ICT sectors.
The eligible activities include:
construction and maintenance of road, rail and airport, equipment and materials;
water and sewer reticulation; equipment and materials;
improvement in existing power generation, transmission and distribution systems;
renewable energy equipment (wind, solar, hydro, geothermal, biomass and biogas power projects);
housing (roofing materials, cement manufacturing, quarry, bricks and related products); and
ICT back bone infrastructure, base stations, mobile money transfer platforms, equipment and related
materials.
Respect of sustainable development (Climate, gender, social etc)
Note
The Bank shall NOT fund projects of a re-financing nature. Priority shall be given to those players that
are directly involved in infrastructure development. Instruments used to implement the product.
Infrastructure Value Chain
Finance (IVCF) cont’d
The instruments include:
structured finance packages;
bank guarantees;
pre-and post shipment finance to exporters and importers;
asset finance;
bankers acceptances;
bridging loans;
working capital short term loans (up to 12 months);
capital expenditure medium term loans (up to 24 months);
order financing;
invoice discounting; and
debt factoring.
Collaboration Opportunities
There is scope for; collaboration with other banks through syndication, and JVs with; municipalities,
road authorities, government departments and private sector.
Infrastructure Value Chain
Finance (IVCF) cont’d
Eligibility Criteria
The Bank will support those projects that are consistent with the Bank’s mandate of infrastructure
delivery and lie within the focus sectors. In addition the projects should be financially sound and
operating sustainably. The Bank will only lend to projects that are able to service their debts within an
agreed time frame. Furthermore, the projects should be socially, economically, technically feasible and
environmentally sustainable. In summary, the projects to be supported should fit the following criteria:
The beneficiary should have been in business for at least three years;
minimum facility thresholds of US$ 100 000;
preferably two year audited financial statements or;
cash flow projections covering the tenure of the facility; and
the firm should be a legal entity registered in Zimbabwe.
Tenor
Short term – 12 months
Medium term – up to 24 months
Infrastructure Value Chain
Finance (IVCF) cont’d
Pricing
Pricing will be guided by the RBZ guidelines on pricing from time to time . However, the Bank ensures that its pricing
is competitive, reflective of market conditions.
The general conditions are as follows:
i. Interest rate - 8% to 10 % p.a.;
ii. Arrangement fee - 1.5% to 2% (flat); and
iii. Guarantees, the commission is between 1.5% and 2% once off and 0.25% quarterly.
How to apply
There is need for a business proposal which is in line with the Bank’s funding requirements check list available at
www.idbz.co.zw or can be obtained from the Bank. The business proposal should be accompanied by an
application letter which states the borrower’s needs.
Customer Due diligence
The Bank consider the following when extending to its customers:
Adherence to good corporate governance practice;
Valid borrowing powers obtained from the responsible authorities/ board resolution;
Audited financial statements;
Compliance with statutory requirements in the sector;
Other Know Your Customer (KYC) considerations; and
Compliance with Anti Money Laundering and Terrorist Financing(AMLTF) principles.
Thank you
Tatenda
Siyabonga
Twalumba
