Private equity participation through Infrastructure funds

Zimbabwe’s economic development depends critically on well-developed and organised infrastructures. Transport and communication services link people, firms, cities, and countries in the global economy. In developing countries, provision of infrastructure has been generally the domain of the public sector, probably due to its perceived strategic ‘political’ importance to the economy and partly because of the large investment costs and also the long gestation periods usually associated with investment in infrastructure projects.

On the contrary, in developed economies, provision of some services by private participants has shown that private financiers are able to mobilize resources necessary to finance infrastructure projects.

In general private participation offers enormous potential to improve efficiency of infrastructure services, extend delivery to the poor, and lessen pressure on public budgets that have long been the only source of infrastructure finance. Hence, private equity financing can play a role in the private provision of public infrastructure.

Zimbabwe can set up a specialised debt structured infrastructure development fund which can seek to deliver investment returns by providing debt financing to local authorities and investing in social and commercial projects. The proceeds from investors will be utilised to fund capital projects like bulk water supply and telecommunication infrastructure. Local authorities can borrow funds from and repay back at a rate of interest below the market rate.

In order, to realize the benefits of such a structure, there is a strong need to establish infrastructure funds of an equity nature which will invest in non-listed companies that develop, own or operate infrastructure facilities and projects. Synergies with multi-lateral institutions such as the International Finance Corporation can be extremely beneficial. And financial institutions that are trying to piggy ride on such multilateral institutions i.e. ABC holdings stand to play an active role in such initiatives going forward.