Three major airports and a key highway may soon be in private hands, if an “asset recycling” proposal by Finance Minister Mthuli Ncube goes ahead.
Last week, Ncube more than doubled toll gate fees as part of a gamut of new taxes under his 2024 budget. The reasons for his controversial move may, at least in part, lie in his plans to cede key infrastructure to private players.
Last December, the government signed an agreement with Africa50, the infrastructure arm of the African Development Bank that is promoting the asset recycling model across Africa. Under this model, a government builds infrastructure then leases it out or sells it to private players. The money raised is used to fund new infrastructure, easing the debt burden on the government.
According to the World Bank, which provides governments with guidelines on asset recycling: “Monetisable public assets can be toll roads, bridges, airports, transit systems, power generation and grids, warehouses, etc.”
The budget statement and the annual debt report say the government is in talks targeting the RGM International Airport, Victoria Falls Airport and Joshua M. Nkomo International Airport. The newly resurfaced Harare-Beitbridge road is also on the list.
“Government will also continue to engage the private sector for possible concessioning of some roads through structured finance, especially those generating sufficient cashflows and whose scale of work can be sufficiently funded through tolling,” Treasury says.
“In addition, Government is engaging Africa 50 to explore asset recycling of projects as a form of infrastructure financing mechanism. This will allow Government to channel fiscal resources to other high priority infrastructure projects, critical for sustainable economic development.”
Adds Treasury: “In addition, the refinancing of the Harare-Masvingo-Beitbridge Highway, will also be included in the asset recycling program, which has been identified as a low-hanging fruit, given that it is being funded from the fiscus.”
The RGM airport terminal is being upgraded under a US$153 million loan from China, which was approved by Parliament in 2018. The 20-year loan came with a 2% annual interest rate, 0.25% commission fees and a seven-year grace period.
The Beitbridge highway was funded from the budget, a financing model that government officials admit was unsustainable as it stoked inflation and struggled to pay contractors on time.
In December 2022, Africa50 announced: “Africa50 and the Government of Zimbabwe’s framework of cooperation will cover the Harare, Victoria Falls and Bulawayo International Airports. Following an assessment of the opportunity to operate these airports under a long-term PPP scheme, Africa50 will then offer to partly or fully relieve the Government of its debt repayment burden associated with the three international commercial airports.”
Does this work?
Sales of national infrastructure are never without controversy. In the UK, Spanish infrastructure giant Ferrovial last week sold its 25% stake in Britain’s busiest airport Heathrow. The airport is now 90% in foreign hands, including investors from Saudi Arabia and China. Hungary’s state-owned Corvinus and Vinci Airports has notified the European Commission of a proposed joint takeover of Budapest’s airport. A Reuters report, citing investment bankers and industry experts, said there will be an acceleration of airport sales across Europe in 2024.
This October, Gambia handed over the Senegambia Bridge, which links Gambia and Senegal, to Africa50’s asset recycling programme. Togo, in July, reached a similar deal with Africa50 for the management of a major highway, the Lomé-Kpalimé Road project. Some countries have modeled private sector participation in state assets differently. In October, DP World, the world’s largest ports company, announced a 30-year deal to run Tanzanian ports, in exchange for funds to expand the infrastructure.
For Zimbabwe, any lease or sale would be closely watched, given how previous attempts to dispose of state enterprises have stalled, and the government’s poor record of managing public assets.
A report by analysts Marsh McLennan said while asset recycling had worked in Australia, the biggest hurdle is public acceptance, especially in places where privatisation has failed: “Having enough public assets to potentially monetize is a key prerequisite for an asset recycling scheme, but equally important is the willingness of the general public to accept private investment and management of infrastructure.”