IDBZ optimistic about completing projects under implementation in 2022

By Almot Maqolo
HARARE – Players in the construction sector have benefited from the improved activity in the economy. There has been a positive impact derived from the high activity in construction projects to catch up on the delivery of these projects. The government has committed to an aggressive rollout of roads, water, agriculture, housing, and energy infrastructure despite continued currency exchange volatility.

Accordingly, the Infrastructure Development Bank of Zimbabwe (IDBZ) aims to contribute to the country’s economic growth in 2022 through sustainable and equitable infrastructure development, thus helping to uplift the livelihoods of Zimbabweans. IDBZ is a government-owned development bank in Zimbabwe, mandated to fund long and medium term funding for key infrastructure projects, including in the areas of transportation, housing, energy, ICT, water and sanitation, realized US$6.62 million (ZWL719.8 million) in 2021 through a ZWL1.75 billion Rights Issue aimed at bolstering its lending capacity towards capital projects.

Here are some of the projects under implementation:

• Lupane Students Accommodation Complex Project (Lupane);
• Chinhoyi University of Technology Student Accommodation Project (Chinhoyi);
• Bindura University of Science Education Student Accommodation Project (Bindura);
• Catholic University of Zimbabwe Student

Accommodation Project (Harare);

• Getjenge Housing Project (Plumtree);
• Spitzkop Housing Project (Gwanda);
• Baraza Pavilion Cluster Homes Project (Harare);
• Honister Drive Cluster Homes Project (Harare);
• Kanyemba Lodge Project (Kanyemba);
• Waneka Phase 3 Housing Project (Harare);
• Tjibundule Solar Project (Grid Impact AssessmentPlumtree);
• Wilsgrove Phase II Housing Project (Bulawayo);
• The Grange of Toronto Housing Project (Penhalonga, Mutare)
• Rooiport Estate Housing Project (Chivhu); and
• Gutu Solar Project (Gutu);

In respect of this rights issue, the Ministry of Finance and Economic Development (MOFED) contributed ZWL500 million, while ZWL219.8 million was received from the Reserve Bank of Zimbabwe (RBZ). A “rights issue” is an invitation to existing shareholders to purchase additional new shares in the company, according to Investopedia. IDBZ said in its results for the year ended December 31st, 2021. “Treasury has injected a further ZWL450 million in April 2022 and is expected to release the remaining ZWL480 million in 2022 in fulfilment of the government’s capital commitment under the Rights Issue.”

To adequately fund projects, the bank embarked on several fundraising initiatives, which included the issuance of USD linked bonds. The bank managed to raise an equivalent of US$9.84 million (ZWL877.9 million) for project implementation. Of this amount, ZWL461.9 million was raised for the Sumben Phase 1 Housing Project and the Elizabeth Park Housing Project through USD-linked Bonds and other structured instruments. A total of ZWL416 million was raised for the Bulawayo Students Accommodation Complex Project (BSAC).

It approved ZWL144 million worth of projects. “During the reporting period, the Bank approved private sector projects worth ZWL144 million, while applications worth more than ZWL1 billion in respect of energy, mining, and irrigation projects were being considered for funding.” On the other hand, the bank’s infrastructure value chain loan book closed the year at ZWL192.8 million, up from ZWL93.54 million as at December 31st 2020. Despite the challenging operating environment and the impact of Covid-19 induced lockdowns, the Bank achieved commendable progress on ongoing projects.

The bank’s inflation-adjusted net operating income decreased by ZWL1.3 billion from ZWL1.2 billion in 2020 to a negative ZWL28.87 million in 2021. Interest income was weighed down by subdued effective interest rates. Operating expenses increased by 95%, driven by a 75% increase in personnel expenses as the bank aimed at retaining critical staff and matching market remuneration levels. On the other hand, administration expenses shot up by 118%, mainly driven by inflation and COVID-19 related expenses.

The bank recorded a loss before tax and other comprehensive income of ZWL945.8 million compared to a profit of ZWL2.5 billion for the same period last year. IDBZ is optimistic that the projects under implementation will be completed in 2022 and that more businesses will be underwritten under the Bank’s private sector funding window. “This is expected to enhance the bank’s financial performance.”

Our Thoughts
Players in the extractive, energy, and infrastructure sectors around the world have for a long time been required to ensure that they run sustainable businesses in order to attract funding from prospective investors. Aside from the competitive pressures that IDBZ faces as a result of technology and inefficiencies in the construction industry as a whole, is also the issue of the contractual nature of construction work versus the inflationary economic environment.