5 October 2012

Zimbabwe: Transportation Infrastructure Vital for Economic Competitiveness

Photo: Leadership
Oil Pipeline

column

Our nation faces a number of challenges on its quest for development, and a key factor in the impediment of economic growth is the lack of quality infrastructure; especially transportation network.

Infrastructure is a stimulus for the economic growth process and access to funding is critical in this respect. Finance Minister Tendai Biti recently said the country requires around US$20 billion for infrastructure development and repair an amount greater than our current economy size. The transport network comprises roads, rail and air. The government is the public main provider of the infrastructure services, given the historical minimal participation of the private sector in the provision of same.

Zimbabwe's external debt in excess of US$11 billion arrears owing to the prolonged political and economic crisis, limits the country's capacity to borrow from regional and multilateral financial institutions to finance infrastructure. So, what options are can be pursued to close this gap?

Given the quantum of financial resources needed, additional financing to close Zimbabwe's infrastructure gap is unlikely to come from the three traditional funding sources, which is public sector (government), overseas development assistance and private funding because these are already under strain. Some African countries are increasingly turning to non-traditional financiers to meet their needs. China, India and some Arab states are the biggest provider of non-traditional finance. A particularly interesting form of Chinese financing in Africa are 'resource for infrastructure' (R4I) deals. R4I deals present less of a concern than traditional financing for debt sustainability.

Successful examples of such deals have been witnessed in a number of countries; for example Angola, partner in such a deal with China. Angola managed to leverage its oil resources to reconstruct its infrastructure following its civil war. Unreliable and slow transportation unduly stifles the flow of goods: neglected road, rail and air networks combine with red tape to reduce effective freight speeds between destinations. Such limitations close Zimbabwe off from the global economy, in cases reducing firm productivity by up to 40 percent. Consumers tend to pay higher prices for infrastructure services than consumers in other developing countries and the rest of the world.

At the high end of the price ranges, users in Zimbabwe pay three to 10 times more for the same service compared to users elsewhere. These high prices increase the cost of doing business in Zimbabwe and reduce demand by households. In the case of road freight services provided by the private sector, responses from private companies suggest that the average cost of road freight within Zimbabwe is in the range of US$0,10 per tonne kilometre. These rates are substantially higher than those that apply on the regional road corridors in Southern Africa, which are typically in the range of US$0,03-US$0,06 per tonne kilometre.

Low levels of periodic and routine maintenance over the past 10-15 years have been the main cause of the deterioration in the quality of the basic infrastructure of the country. This decline is well illustrated by the experience of the transport sector. International experience indicates that successful public private sector partnership programmes require good public sector management systems, and especially transparent tender processes and enforceable contracts, the use of transactional advisors, minimum political interference, and a relationship of trust between the public and private sectors.

The rail network is another critical element for economic recovery and development as it connects all major economic centres providing transport for bulk raw materials, finished goods and passengers. The rail track infrastructure, signalling and telecommunication system had deteriorated due to theft, and lack of regular repairs and maintenance resulting from financial constraints.

On the other hand, there is an urgent need for a strategic partner for the recapitalisation, rehabilitation and efficient management of the national airline to achieve competitiveness. Most national airlines world over have either been privatized or have invited private sector strategic partners to improve efficiency and international competitiveness. Surely, it is better to own 40 percent of an elephant than to own 100 percent of a rat.

Zimbabwe imports fuel through the 287 kilometre long Feruka pipeline which stretches from Beira in Mozambique to Feruka oil refinery outside the country's eastern border of Mutare. With a carrying capacity of 130 million liters per month, the oil pipeline has capacity to ferry all the fuel which the country consumes. But importers in the country have been shunning the pipeline opting instead for road transport due to various problems. This prompted government to introduce a US$0,04 per litre road fuel levy meant to induce importers to use the pipeline, but the cost is being passed to consumers. Government need to move in to make oil transportation mandatory by pipeline to decongest roads.

In the early 1990s, the coverage and quality of the basic infrastructure of Zimbabwe was among the best in the region. In the past decade, there has been a substantial deterioration in the quality of these infrastructure assets despite Zimbabwe being strategically positioned to provide a gateway to markets within the SADC region and beyond.

Despite tollgate fees being paid to ZINARA since 2009 no meaningful roads development has been witnessed. The Harare - Masvingo, Harare - Bulawayo, Airport and Shamva - Bindura roads are moving at a snail pace.

Ads by Google

Copyright © 2012 Financial Gazette. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.

InFocus

Russian Company to Build Pipeline for Zimbabwe

Oil Pipeline

A Russian company Rosnett, is planning to build a pipeline for refined petroleum products and will also serve Zambia, Malawi and Botswana. Read more »