S. Biyam Executive Director: BAZ

2. Access to Capital Recapitalization & Greenfield Projects S. Biyam Executive Director: BAZ

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

4. 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

5. Introduction 2012 Inflation Forecasts………

6. 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

7. Real GDP Growth (yoy%)

8. 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.

9. 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

10. 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

11. MONETARY DEVELOPMENTSDEPOSITS GROWTH (US$ millions) SOURCE : RBZ MONETARY POLICY STATEMENT, January 2012

12. 2011 Deposits Structure Over 90% of Deposits are Short Term

13. Sectoral Credit Distribution

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

15. 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

16. 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

17. Capital Financing Requirements • Agriculture • Manufacturing • Infrastructure • Mining • Other sectors

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

19. 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

20. Infrastructure Development • Substantial Financing Requirements: • Energy & Power • Roads & Railways • Water and Sanitation • Airports, Universities, Hospitals • Irrigation & Dams

21. 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

22. Mining Greenfield Projects

23. 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:

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

25. 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

26. 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

27. Green Field Mining Projects ……….capital intensive industry

28. Project Funding Cycle Lower risk, lower reward High risk, high reward

29. 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

30. 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

31. 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.

32. 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

33. THANK YOU