Zimbabwe’s construction industry will only grow by an average of 5% in the next five years due to economic challenges facing the country, BMI Research, a Fitch Group company, has revealed.
BY MTHANDAZO NYONI
Speaking at the recent Zimbabwe National Chamber of Commerce annual congress, BMI Research head of infrastructure research Richard Marshal said the sector was affected by years of economic decline.
“The infrastructure sector in Zimbabwe has been a victim of the constrained economic fiscal issues within Zimbabwe and as a result Zimbabwean businesses are having a high cost building,” he said.
Marshal said Zimbabwe was an unattractive market in doing business compared to its regional peers.
“Overall we expect the construction sector to be just as constrained as any other sector within the Zimbabwean economy due to economic realities that we are facing,” he said.
“We forecast the construction sector growth would be capped below 5% over the next coming five years under the circumstances.”
Zimbabwe’s infrastructure growth is being driven by government and the Chinese, he said.
In 2018 government allocated $139 million towards infrastructural projects.
“However, this growth rate is below the potential of Zimbabwe given the demand for investment in things like infrastructure and construction,” Marshal said.
He said relying on China for infrastructural development was not necessarily the answer for Zimbabwe.
“The solution lies with addressing economic challenges affecting the country through re-engagement with the international community, starting with holding free and fair elections next month,” he said.
“Dealing with economic challenges facing the country is absolutely crucial for this infrastructure growth.
“Without an improvement in the liquidity situation, the private sector is unable to invest more in infrastructure.
“Without economic growth, government would not have revenues to also invest more in the infrastructure sector.
“Key to unlocking economic growth is the re-engage process. The re-engagment ing process starts with free and fair elections.
“After free and fair elections that’s when you will see the return of countries such as the United Kingdom, European Union, the United States of America, ready to help Zimbabwe financially integrate back into the global economy.
“Once this process starts, Zimbabwe can then start dealing with the statutes….”
According to BMI’s infrastructure key projects database, Zimbabwe has a $21 billion worth of projects that are in the pipeline.
At least 67% of the amount would be channelled towards power plants and transmission grids development while 25% would go towards roads and bridges.
Water and industrial construction projects would chew 3% each of $21 billion while commercial construction projects would take 1%.
The remaining 1% would be taken by other projects.
“The use of independent power producers (IPPs) is crucial in terms of delivering projects in a timely manner given the fiscal constraints,” Marshal said.
Meanwhile, Marshal said the mining industry’s value was forecast to increase from $1,34 billion in 2018 to $1,5 billion by 2022 due to President Emmerson Mnangagwa’s push to lure foreign investors.
The gold sector expects modest production growth due to rising gold prices and expansion plans by junior miners.
formalisation of widespread small-scale gold mining poses upside risks to the production forecast, he said.
Marshal said the platinum sector was facing limited production growth due to a subdued price outlook and a weak project pipeline.
“We expect operations at Zimplats to expand, more conservative on Mimosa mine and Unki mine,” Marshal said.
He said foreign miners were keen to negotiate to return to the diamond mining sector after consolidation, even with the 51% ownership structure in place.
Marshal said lithium provided the best prospects for investors in the short term.
“Lithium-ion batteries to emerge as the dominant battery technology in the power and transport sectors over the coming decade,” he said.