We remain pessimistic on the outlook for Zimbabwe s construction industry due to continued political risk stemming from the policies of President Mugabe, and political uncertainty over succession as the aging dictator s health wanes. Policies have dissuaded all, but the most risk tolerant investors and the government is severely limited in its ability to fund large-scale infrastructure projects itself. ...China will continue to play a central role in financing and constructing infrastructure, especially in the power sector. Our core scenario is for President Mugabe s four-decade long rule to end via retirement or death with the ruling ZANU-PF party retaining political dominance and implementing some reforms to revive Zimbabwe s struggling economy. The nature of these reforms will depend on who takes over leadership, with current front-runner Vice-President Emmerson Mnangagwa likely to be the most reformist. Nevertheless, we cannot rule out a political confrontation, given the urgent need for policy change and growing recognition that meaningful reform will most likely occur in tandem with the departure of the ---year old Mugabe. In addition, factionalism within the ruling party is reaching critical levels, which could prompt party elders to take drastic measures in order to secure their own political future.
...Lower commodity prices have resulted in reduced capital expenditure in Zimbabwe s mining sector and a slowdown in construction growth. With prices set to remain low, we expect the construction industry to post real growth rates of -.- and -.- in ---- and ---- respectively. ...However, the succession questions will intensify as ailing president Robert Mugabe s rule approaches an end. A bright spot will be the power sector, where a number of high-value coal and solar projects will move forward in coming years, supported by Chinese financing and expertise. In September, the government of Zimbabwe signed an agreement with the governments of Botswana and Mozambique for the development of around ----km or railway connecting the three countries, with each pledging an investment of USD---mn in capital for a project which will also seek private investment via the PPP model. ...A bright spot will be the power sector, where a number of high-value coal and solar projects will move forward in coming years, supported by Chinese financing and expertise. In September, the government of Zimbabwe signed an agreement with the governments of Botswana and Mozambique for the development of around ----km or railway connecting the three countries, with each pledging an investment of USD---mn in capital for a project which will also seek private investment via the PPP model.
...We believe that poor governmental budgeting, lower than expected tax revenues and a desire to keep public wages elevated will limit the government s ability to adequately fund infrastructure. Deficit reduction will have to come from spending cuts. ...
