IDBZ courts investors for $250 million stake

THE Infrastructure Development Bank of Zimbabwe (IDBZ) will allow local and international institutional investors to take up equity in the bank as part of measures to grow its capital base to $250 million in the next two years, it has been learnt. IDBZ is a statutory body that came into being in September 2005 with a mandate to promote economic development and growth.

With a small capital base of US$48 million relative to its peers in the region such as the Development Bank of South Africa (DBSA) (US$1,7 billion), the IDBZ has not been able to fully follow through some of its planned projects. The World Bank estimates that the country's infrastructure funding gap stands at US$33 billion.

In fact, the African Development Bank (AfDB) report on Infrastructure and Growth in Zimbabwe (2011) estimates that the country requires about US$14,2 billion; including US$4,6 billion of private investment, to upgrade existing infrastructure and create new capacity from 2011 to 2020.

Last week, IDBZ chief executive officer Mr Thomas Sakala told The Sunday Mail Business that there is need for the institution to have a "sizeable balance sheet" for it to be able to co-finance selected local infrastructural projects.

It is believed that a bigger balance sheet could also be used as leverage to raise both long-term debt and lines of credit from local and international markets.

"The bank's capitalisation will take various forms including, but not limited to equity and quasi-equity instruments," said Mr Zondo Sakala.

The next phase of the capitalisation project will involve courting regional, continental and international development finance institutions (DFIs) "with a shared focus on infrastructure" to be part of IDBZ's shareholders.

There will also be a deliberate effort to rope in infrastructure funds and sovereign wealth funds.

"Having DFIs in the bank's shareholding structure will create opportunities for accessing lines of credit, credit enhancements on the bank's debt instruments and also provide opportunities for knowledge sharing and technical assistance," explained Mr Sakala.

IDBZ will enlist the services of "seasoned" financial advisers.

The bank's under-performance, underlined by a US$4 million loss in 2015, has significantly limited its ability to invest meaningfully in local infrastructure projects.

But there has been some success in raising funds for housing and power generation projects.

Recently, the bank announced that it had managed to raise US$50 million towards the expansion of Kariba South Hydroelectric Power Station, which is expected to add more than 300 megawatts (MW) to the current capacity of 750MW.

In the first-half period ending June 30, 2016; IDBZ reported a profit of US$170 000 from a loss of US$4 million realised in the same period a year earlier.

In 2012, the Zanu PF manifesto noted that Government would endeavour to capitalise the institution to the tune of US$5 billion, of which US$3 billion was expected to finance the rehabilitation and construction of physical infrastructure.

A further US$2 billion was expected to finance the rehabilitation of social infrastructure.

Although IDBZ was saddled with a legacy debt of US$40 million as at December 31, 2013; in November 2014 the Zimbabwe Asset Management Company (Zamco) — a special purpose vehicle created by the Reserve of Zimbabwe (RBZ) to buy toxic assets of bank's balance sheets — took over IDBZ's US$40 million legacy debt.

Crucially, the bank was also removed from the United States Office of Foreign Assets Control (OFAC) list, which limited its ability to attract investors.

The IDBZ has since begun establishing relationships with correspondent banks in China, the United States, the UK and Germany.