S biyam executive director baz
This presentation is the property of its rightful owner.
Sponsored Links
1 / 33

S. Biyam Executive Director: BAZ PowerPoint PPT Presentation


  • 98 Views
  • Uploaded on
  • Presentation posted in: General

Access to Capital Recapitalization & Greenfield Projects. S. Biyam Executive Director: BAZ. Contents. Introduction Recent Financial Developments Capital Requirements By Industry Agriculture Manufacturing Mining sector Financing Requirements Greenfield Projects Concluding Remarks.

Download Presentation

S. Biyam Executive Director: BAZ

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Access to Capital

Recapitalization & Greenfield Projects

S. Biyam

Executive Director: BAZ


Contents

  • Introduction

  • Recent Financial Developments

  • Capital Requirements By Industry

    • Agriculture

    • Manufacturing

    • Mining sector Financing Requirements

  • Greenfield Projects

  • Concluding Remarks


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


Introduction

2012 Inflation Forecasts………


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


Real GDP Growth (yoy%)


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.


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


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 US$3.25 billion.

  • 90% of deposits are short term


MONETARY DEVELOPMENTSDEPOSITS GROWTH (US$ millions)

SOURCE : RBZ MONETARY POLICY STATEMENT, January 2012


2011 Deposits Structure

Over 90% of Deposits are Short Term


Sectoral Credit Distribution


Utilization of Bank Credit

2011 Utilization of Bank Credit by Purpose

  • Source: RBZ MPS July 2011


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


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


Capital Financing Requirements

  • Agriculture

  • Manufacturing

  • Infrastructure

  • Mining

  • Other sectors


Agriculture Financing Requirements

  • Agriculture Financing Requirements exceed a $1 billion annually in respect of Crop Financing.

    • Land Preparation

    • Seeds & Fertilizers

    • Fuels & Utilities

    • labour


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


Infrastructure Development

  • Substantial Financing Requirements:

    • Energy & Power

    • Roads & Railways

    • Water and Sanitation

    • Airports, Universities, Hospitals

    • Irrigation & Dams


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


Mining Greenfield Projects


Mining Financing Requirements

  • Current estimates show as much as US$5 – US$6 billion recapitalization requirements over the next 5 years.

    • Gold (US$1 billion)

    • Platinum (US$1.2 billion)

    • Nickel (US$110 m)

    • Chrome (US$118 m)

    • Diamonds (US$339 m)

    • Coal (US$225 m)

  • Mining requires over substantial resources for capitalization:


The Golden Opportunity……..Surging Gold Prices since 1995


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


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


Green Field Mining Projects ……….capital intensive industry


Project Funding Cycle

Lower risk, lower reward

High risk, high reward


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


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


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.


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


THANK YOU


  • Login