AFC ready to invest in Zim

HARARE - Africa Finance Corporation (AFC), which holds $3,2 billion in assets under management, says it is ready to pour in millions of dollars needed for the construction and refurbishment of infrastructure in Zimbabwe.

This was after the southern African country last week became the latest member to join the international money lender.

“In becoming a member state of AFC, Zimbabwe will now have access to funding from global capital markets to develop its national infrastructure — markets which until recently the country was not able to access,” the United Kingdom-based institution’s spokesperson told The Financial Gazette.

AFC, which raises its funds from international capital markets, indicated that it is looking to invest in five areas of infrastructure such as energy, telecommunications, natural resources, transport and logistics, and heavy industries.

Last year, AFC launched a $500 million Eurobond which secured subscriptions from global investors including the United Kingdom, Europe, the United States, and Asia.

Although the financial institution did not specify how much it is willing to invest in Zimbabwe, the company said all projects to be undertaken in the country “will be assessed on their merit”.

“It varies from deal to deal, that is, debt or equity finance among others. There is no predetermined amount — however, it is always competitive,” AFC said on the tenure of its loans.

Data from various organisations such as the World Bank and the African Development Bank show that Zimbabwe requires close to $20 billion to revamp its ageing and dilapidated infrastructure, as part of efforts to implement deepening regional integration in southern Africa.

Market experts assert that poor infrastructure continues to be a serious impediment to inclusive growth in most African economies.

“African economies have been resilient to negative shocks, but poor infrastructure is a serious impediment to inclusive growth,” the AfDB said in a recent report.

The report also noted that Africa’s infrastructure was still behind those of other regions in quantity, affordability, and quality due to lack of investment.

It observed that Africa needs higher growth and investment rates, but debt levels must be monitored closely.

The regional financial institution indicated that public debt ratios were on the rise, stocked by appetite for infrastructure spending.

The economic report also highlights that 40 countries on the continent recorded increases in external debt between 2013 and 2016 with nine countries experiencing a decline.

It stated that although there were growing concerns about the debt levels in Africa, if used productively, the debt may be necessary to unlock long-term growth potential.

“Tackling poverty will need efforts to increase employment elasticity of growth. The employment elasticity of growth of 0,41 percent in Africa is below the desirable 0,7 percent for all developing countries.

“Pressing policy concern is therefore to ensure that growth is reflected in creation of high and quality jobs,” added AfDB in the economic outlook report.

It recommended that for the international financial community to resolve the savings glut, there is a need for the adaptation of a policy of more negative real interest rates in high-income countries; implement use of excess savings to finance public investment in rich countries as well as facilitating the flow of capital to developing countries.

Estimates show that investment needs for infrastructure on the continent range from $130 billion and $170 billion annually.

The bank proposed that many new financing mechanisms could be implemented in all African countries, taking into account the specific economic circumstances and the productive structures of national economies.

It also urged countries on the continent to focus on how best they can use scarce infrastructure budgets to achieve the highest economic and social returns.

— The Financial Gazette

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