There are 88,100 km of classified roads in Zimbabwe, 17,400 km of which are paved .About 5 percent of the network is classified as primary roads and has some of the most trafficked arterials that link Zimbabwe with its neighbors. A portion of the Pan-Africa Highway passes through Zimbabwe. This part of the road network plays a major role in the movement of the country’s imports and exports as well as transit freight. However lately due to fiscal constraints and budgetary ills, the road network has rapidly deteriorated and can be described as in intensive care. There is need for rehabilitation, maintenance and construction of new roads especially the Beitbridge- Chirundu highway ( a transit corridor) linking South Africa and the upper parts of Africa. Road carnage have been prevalent and the busy road is narrow and can not contain the level of traffic flow operating there. A developmental Imperative therefore presents itself on how to finance the road construction against compiling government developmental initiatives. A financing mechanism is therefore proposed in this presentation. This Innovative finance model ensure private capital investments funding development against government financing. This provides a breather to the government as they focus on other initiatives and the private sector wins through greater financial and social returns inherent in these financing structures.

1. ROAD INFRASTRUCTURE
DEVELOPMENT & FINANCING IN
ZIMBABWE
Vincent Mutsvene
Financing For Development
MOOC’s 2017
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2. INTRODUCTION
There are 88,100 km of classified roads in Zimbabwe, 17,400 km of which are paved .About 5 percent
of the network is classified as primary roads and has some of the most trafficked arterials that link
Zimbabwe with its neighbors. A portion of the Pan-Africa Highway passes through Zimbabwe. This
part of the road network plays a major role in the movement of the country’s imports and exports as
well as transit freight.
However lately due to fiscal constraints and budgetary ills, the road network has rapidly deteriorated
and can be described as in intensive care. There is need for rehabilitation, maintenance and
construction of new roads especially the Beitbridge- Chirundu highway ( a transit corridor) linking
South Africa and the upper parts of Africa. Road carnage have been prevalent and the busy road is
narrow and can not contain the level of traffic flow operating there.
A developmental Imperative therefore presents itself on how to finance the road construction
against compiling government developmental initiatives. A financing mechanism is therefore
proposed in this presentation. This Innovative finance model ensure private capital investments
funding development against government financing. This provides a breather to the government as
they focus on other initiatives and the private sector wins through greater financial and social
returns inherent in these financing structures.
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3. COUNTRY ROADS OVERVIEW
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4. COUNTRY ROADS OVERVIEW
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5. .

6. PROJECT FINANCE : A Win-Win Solution For Infrastructure Development
Financing Means of raising long term non-recourse debt financing
for major projects based on lending against the project’s future
cash flows and depends on a detailed evaluation of project’s
construction, operating and revenue risks, their allocation between
the investors, lenders and other parties through contractual and
other arrangements.
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7. PROJECT FINANCE : A WIN-WIN SOLUTION FOR INFRASTRUCTURE DEVELOPMENT
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Government
Objectives
Private Sector
Goals
Alleviation/removal of the
Government’s role
Injection of private capital
in public services
Increased budgetary
certainty
Introducing private sector
efficiencies
PROJECT
FINANCE
Maintaining oversight to
ensure quality
Attractive risk weighted
returns
Government guarantees
mitigate certain risks
Long-terms investment
opportunities
Upside from operational
outperformance
To operate under a clear
regulatory framework
.

8. PROJECT FINANCE – KEY BENEFITS
 Faster procurement of large infrastructure projects
 Respond to infrastructure needs despite budget constraints
 Benefit from private sector efficiencies – Whole life” approach to construction/maintenance with optimized
allocation of life cycle cost and improved management of operational risks
 Transfer risks to private sector – Public sector does not pay until the infrastructure has been delivered: no
service / no pay
‐ Incentivise on time and on budget project implementation
‐ Incentivise cost control
‐ Incentivise innovations in design/service delivery and financing structures
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Optimal risk allocation  Reduced cost of risk / Increased efficiencies  Better Value For Money
.

9. WHY PROJECT FINANCE
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Full Divestiture
Technical
Assistance
Service
Contract
Management
Contract
Lease
Contract
Concession Contract
3-5 yrs
5-15 yrs
1-3 yrs
25-30 yrs
Risktransferredcontractuallytoprivatesector
As the contract term increases, an increasing amount of risk can be allocated to the private sector
Contract Duration
Limited risk transfer to private sector
Government control
Full risk transfer
No government control
Substantial risk transfer
Government control
Most common
PPP model
.

10. CHALLENGES OF PROJECT FINANCE IN ZIMBABWE
 Political instability – frequent regime changes and related security issues
 Slow decision making and inconsistent public policies
 Lack of transparency and appetite for negotiated deals
 Willingness to pay – Public unwilling to pay commercial rates for infrastructure services
 Affordability – Limited ability to pay in some countries (low per capita income)
 Over-sized public sectors – Reluctance to address due to unemployment concerns
 Capital markets – mostly under-developed and inexperienced (e.g. short debt maturities, limited fixed
rate local currency bank financing, domestic institutional sources of infrastructure equity)
 Low infrastructure spending – Historic under investment in infrastructure
 Institutional, legal and regulatory framework – weak or inexistent
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11. KEY SUCCESS FACTORS FOR PPPs
 Government Support
‐ Successful implementation requires strong Government support from the outset
Coordination with all governmental stakeholders involved (e.g. Line Ministry, MoF, regulatory bodies, etc.) to obtain timely decisions / approvals
Subsidy requirements
‐ In the longer run, creation of a dedicated PPP Unit
If initial Government support can emerge around a specific sector, a dedicated PPP unit later helps to centralize the process and provides a
wider perspective on the PPP program of the country
 Legislative Framework
‐ Establish a sound institutional, legal, and regulatory framework
Adequate dispute resolution mechanisms have to be in place
Eliminate legal uncertainties and impediments to PPPs to attract foreign investors, e.g. clarity on procurement and approval processes, equal
treatment of foreign investors, no sub-contracting restrictions, property rights on land and assets, repatriation of profits, termination rights, etc.
Eliminate legal uncertainties and impediments to project financing, e.g. possibility to provide sovereign guarantees, to grant and enforce security
interest, etc.
 Appropriate Risk Mitigation
‐ Risks allocated to the party that is best able to manage them
 Affordability
‐ Willingness of the end-consumers to pay but also realistic tariffs and subsidy levels11
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12. SOURCES OF PROJECT FINANCE
Commercial banks-
banks
Pension funds
Insurance
Multilateral lenders
Regional development banks
Export credit Agency
Equity- for new or same line of
business
Pure equity or Quasi equity,
Preferred equity, Shareholder loans
Pension funds- matches with
pension obligations
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• A 'syndicate' of lending
institutions
• Senior debt, Second lien debt,
Mezzanine debt, Convertible debt
• Bank loans (usually short term)
• Construction companies @
risk capital
• Infrastructure Bonds- based on
project cash flows
• Revenue Bonds- used by
municipals
• Securitization – receivables
used to float a bond

13. OVERVIEW OF THE PROJECT FINANCE CONTEXT IN ZIMBABWE
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A number of Successful PPPs in the past 10 years,
mostly in the power sector, but also in water, airport
and industrial sectors
Substantial demand for all forms of infrastructure
driven by growing populations, urbanization and rising
expectations, while Governments alone cannot
support this level of investment
Capacity and willingness of public stakeholders to
deliver what is required to bring a project to the market
and close deals
Underdeveloped capital markets and legislative
frameworks
Legacy of the 2008-2009 financial crisis (tightened
lending requirements)
Increased fiscal constraints could incentivize
Governments to seek private sector participation
Ongoing Road Project for Infralink
Continuous political instability and security issues in
the region
For those projects where Government support is
required, tighter budgets conversely generate a new
spending squeeze as well as renewed questioning
around actual Value For Money of PPPs
Project
Finance in
Zimbabwe
Strengths Weaknesses
Opportunities Threats
.

14. VISUALS – PROGRESSING TOWARDS FINAL DESIGN
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