BMI View: The country's construction industry remains high risk, poorly financed and subject to the unattractive investment policies of President Robert Mugabe, with average annual real growth between 2015-2024 expected to be a mediocre 2.6%. Zimbabwe is keen to encourage foreign investment, with China so far leading any inroads into the country's power and mining sectors . H owever, even Chinese investment is lower than expected and Mugabe's rhetoric strongly points to continued restraints on foreign investment.
Zimbabwe holds potential as a frontier growth market in Southern Africa, but it is highly unlikely to meet that potential under current conditions - namely the policies enacted by President Robert Mugabe and his regime, which make it risky for foreign investors to gain access to the market. The mining sector, which is a key growth driver for the country's infrastructure, has in the past been hit hard by indigenisation drives. With Mugabe expected to continue to execute these policies, we expect the mining industry will not support the infrastructure sector as we have seen previously, and therefore forecast stagnant real growth in the construction sector.
Key Trends And Developments
Zimbabwean company PER Lusulu Power obtained a USD950mn loan from China to fund the development of the USD1.1bn first phase of the Lusulu thermal station in Binga, Matabeleland North. The 15-year loan carries a 7% rate of interest. 'We hope that part of the funding will come from Zimbabwe as Old Mutual and other financiers have expressed interest,' said Stuart Perry, PER Lusulu chairman. Work on the first phase is expected to begin in April 2016 and is expected to be completed in H119. Once the first phase is complete, the plant is expected to produce 600MW of power and once the fourth phase is complete, production capacity will increase to 2,000MW.
The Zimbabwe Power Company (ZPC) seeks to produce more than 9,000GWh of power in 2015.The projected output is 9,799.06GWh, up from the target of 9,766.39GWh in 2014. Zimbabwe's government has started implementing projects, including the expansion of the Kariba and Hwange power plants to meet demand. Additional units to be built at Kariba and Hwange will add another 900MW to the grid.
The Zimbabwe Power Company (ZPC) is expected to complete building a 120MW emergency/peaking power plant in Mutare, Zimbabwe, by 2018. The project is estimated to cost about USD1.2bn. The gas and diesel power plant is one of the planned priority projects under the Zimbabwe Agenda for Sustainable Socio-Economic Transformation 2014/18. The peaking power plant will have a dual powering mechanism, which will allow it to run on either diesel or gas. ZPC will import the fuel for the plant from Mozambique. ZPC has already issued a tender, inviting firms to submit bids to carry out construction of the station.
China Civil Engineering Construction Corporation's (CCECC) subsidiary, CRCC China-Africa Construction, has won a USD1.9bn contract for the Magamba 2015 housing project in Zimbabwe. The contract has been awarded by the country's Ministry of Local Government, Public Works and National Housing. Work will be carried out under phased construction contracts. The phases will be timed according to the progress of securing funds.
Within BMI's Sub-Saharan Africa Infrastructure Risk/Reward Index in Q415, Zimbabwe's score is the second-worst among its regional peers - only better than Sudan and South Sudan, with an overall score of 27.5 out of 100. It scores below the regional average for all indicators, with the lowest score for Country Risks.