Group Strategy Template

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(No Transcript)
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Access to Capital Recapitalization Greenfield
Projects
S. Biyam Executive Director BAZ
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Contents

• Introduction
• Recent Financial Developments
• Capital Requirements By Industry
• Agriculture
• Manufacturing
• Mining sector Financing Requirements
• Greenfield Projects
• Concluding Remarks

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Introduction

• Economic Developments
• Economy broadly in recovery
• Low and stable inflation
• Positive real GDP Growth (9.3) in 2011
• Banking sector deposits growth
• Fiscal Revenue growth
• Slow capacity recovery
• Steady Growth in aggregate demand (Retail Sales)
• Measured progress in infrastructure
  Rehabilitation

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Introduction
2012 Inflation Forecasts
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Inflation Forecasts

• Inflation is likely to be in the range of 4-5 in
  2012
• Inflation has remained low and stable since
  dollarization
• Allows for savings , investment and business
  planning
• Hence steady (uneven) business capacity recovery

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Real GDP Growth (yoy)
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Sectoral GDP Growth Rates

• Total GDP growth 9.3
• Of which
• Agriculture 7.4
• Mining 25.8
• Finance and Insurance 24
• distribution and tourism 10.3
• and manufacturing 3.5
• 2012 growth is projected at 9.4, but is likely
  to moderate to reflect among other things current
  liquidity challenges.

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Introduction

• But, the economy continues to face serious
  challenges
• Liquidity (few lines of Credit)
• Structural challenges low savings Investment
• Low capacity utilization
• Energy Power shortages
• Jobless recovery (slow jobs formation)
• Uncertain Business Environment
• Perceived Sovereign risk issues.
• Outstanding external debt arrears

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Recent Monetary Developments

• Banking Sector Financing capacity is a function
  of intertwined factors
• Domestic deposits growth and
• Credit lines
• Exports growth
• Total deposits in 2011 grew by 41 to US3.25
  billion.
• 90 of deposits are short term

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MONETARY DEVELOPMENTSDEPOSITS GROWTH (US
millions)
SOURCE RBZ MONETARY POLICY STATEMENT, January
2012
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2011 Deposits Structure
Over 90 of Deposits are Short Term
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Sectoral Credit Distribution
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Utilization of Bank Credit

• 2011 Utilization of Bank Credit by Purpose
• Source RBZ MPS July 2011

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Utilization of Bank Credit

• About 7 of bank credit is committed towards
  capital expenditure by the private sector
• This highlights the acute capital deficit
  conditions of the country and the need for urgent
  remedial measures

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Banking Sector Conditions

• Tight Liquidity Conditions
• Since December 2011, Delayed Payments Settlement
  across most banks
• Absence of interbank market
• Limited interbank trading instruments
• Slow Deposits Growth
• Transitory deposits

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Capital Financing Requirements

• Agriculture
• Manufacturing
• Infrastructure
• Mining
• Other sectors

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Agriculture Financing Requirements

• Agriculture Financing Requirements exceed a 1
  billion annually in respect of Crop Financing.
• Land Preparation
• Seeds Fertilizers
• Fuels Utilities
• labour

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Manufacturing

• CZI has highlighted that industry requires as
  much as 2 billion to recapitalize.
• Factory re-tooling
• New Equipment Technology
• R D (New product development)
• New Markets

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Infrastructure Development

• Substantial Financing Requirements
• Energy Power
• Roads Railways
• Water and Sanitation
• Airports, Universities, Hospitals
• Irrigation Dams

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Financing Greenfield Projects

• Greenfield Projects require special financing
  because of their unique status
• Typically Greenfield Projects are
• Capital hungry (particularly in mining)
• High risk with uncertain outcomes
• Require Longer term financing
• Open new frontiers for innovation and technology
• Venture capital financing

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Mining Greenfield Projects
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Mining Financing Requirements

• Mining requires over substantial resources for
  capitalization

• Current estimates show as much as US5 US6
  billion recapitalization requirements over the
  next 5 years.
• Gold (US1 billion)
• Platinum (US1.2 billion)
• Nickel (US110 m)
• Chrome (US118 m)
• Diamonds (US339 m)
• Coal (US225 m)

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The Golden Opportunity..Surging Gold Prices
since 1995
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Opportunities in Mining

• Zimbabwe has over 40 different minerals Green
  Field mining Projects
• Major Minerals are
• Platinum (45)
• Gold (24)
• Diamonds (14)
• Chrome
• Coal
• Nickel

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Mining Financing Requirements

• Growth in the medium to long-term can only occur
  with additional investment in the sector.
• There is need for
• exploration financing
• expansion of current projects and
• Greenfield Projects new mines development
• Infrastructure development is key
• Power and energy
• Efficient transport systems (railway networks)
• Beit Bridge Boarder Post chaos

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Green Field Mining Projects .capital
intensive industry
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Project Funding Cycle
Lower risk, lower reward
High risk, high reward
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Typical cost of a large scale mine over its life

• Gross outlay to get a mine to production up to
  315m and up to 12years

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Role of FDI in Financing Mining

• Long Term Funding is key for sustained mining
  sector growth
• Venture Capital Financing
• High risk/ high return
• Shareholders Equity
• Debt Financing
• Structured Financing
• Syndicated Loans

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What is Required?

• Political and Macroeconomic stability
• Genuine Domestic stakeholder Engagement
• Stakeholder Consensus driven Policies
• Genuine External Stakeholder Engagement
• External Debt and Arrears
• Visible Investment Promotion
• Secure Tenure Investment security
• Policy consistency
• Conducive Investment Environment.

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Concluding Remarks

• At present, the banking sector in Zimbabwe cannot
  meet national financing requirements, let alone
  financing Greenfield Projects
• Access to capital is key for growth
• Size matters in financial affairs - For a small
  open economy with low domestic savings, FDI is
  critical for growth
• Improving the investment environment becomes an
  integral part of proactive economic development
  policy

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THANK YOU