Nobody ever pays for Zim’s infrastructure…The legacy of decaying social contracts and poor central planning

11 Aug, 2017 - 05:08 0 Views
Nobody ever pays for Zim’s infrastructure…The legacy of decaying social contracts and poor central planning Minister Chombo

eBusiness Weekly

Chris Chenga
This year opened with a feverish rush, particularly in infrastructure. Beaming headlines in the Financial Times such as “investments in infrastructure assets soar”. Publications by advisory beacons McKinsey Global Institute, for instance, affirmed up to $57 trillion worth of opportunity over the next 15 years in potential infrastructure projects to wet investor appetites.
In the eastern hemisphere, it was no coincidence that the Chinese ventured into facilitating an Asian focused infrastructure bank, much so starting with an initial capitalisation of $100 billion.
Large scale infrastructure projects such as railway lines and airports in East Africa have become the economic appeal of the day, attracting investment flows hardly seen in decades past.
As you enter metropolitan areas such as Addis Ababa and Nairobi traffic congestion used to be explained by poor urban planning, now it is caused by disruptive construction pillars and cranes. Entirely new cities are popping up, in Angola for instance, shorelines are traced with highways and high rise buildings.
Billions are going into funding ventures that will see long term returns for investors, simultaneously enabling business activity and civic well-being.
Yet, for what seems to have become conventional everywhere around us, Zimbabwe has seen cumulatively less than $10 billion of infrastructural investment in the last 10 years, failing to average a billion dollar investment per annum. At current trends, Zimbabwe receives annual investment of less than 5 percent of its GDP. For us, this is a serious structural imbalance.
Furthermore, investment into Zimbabwe over the last ten years has been less than 10 percent of cumulative Sadc investment in infrastructure. The disparity is ridiculous. This is no minor issue! It is a matter which should be of significant national concern!
Our infrastructure deficit shows across multiple metrics; shortage of schools, shortage of medical facilities, power and water deficits.
Indeed the sustained high costs of business which has made Zimbabwean productivity far less competitive to regional peers is an inheritance of deficient infrastructure, the ailments are far reaching into the depressed social welfare of potential infrastructure end users.
What is the problem?
The volumes of investment elsewhere comparable to Zimbabwe demand deep introspection and genuine explanation to business and society at large. Suggestions, or excuses, proffered by political and economic governance are often stale, and in instances completely inaccurate.
This is due to a retained fundamental misinterpretation of what infrastructure investment actually is. A societal narrative is amiss from our understanding of infrastructure investment.
Infrastructure is a reflection of a nation’s social order and chosen way of life.
Infrastructure is a planned set up in which a people organise their means of work, recreation, education, and communal interaction within the territory in which they dwell. Infrastructure defines a civilisation.
Thus, infrastructure is only sustained by that civilisation’s social contracts and central planning. So in a case where a nation experiences prolonged trivial levels of investment into its infrastructure, this can be perceived as decaying social contracts and poor central planning. This is precisely what our low levels of investment should tell us!
CPI- City Prspoerity Index (CPI) has a double function. Firstly, it serves as a platform for global comparability in which cities can assess their situation with other cities worldwide. Secondly, it acts as a strategic policy tool where the data and information is adapted to local or contextual needs, and used to measure progress and identify deficiencies in the different dimensions of prosperity.
Numerous European, Asian, and fellow African delegations travel to Zimbabwe. Minister Bimha and Minister Chinamasa can vouch to the frequency at which their respective ministries engage curious prospects.
Many of our private business delegations entertain potential investors as well.
Zimbabwe is not hidden from global observation. However, many could-be suitors leave without tangible investment interest; others such as Pepsi and Legacy Hotels to mention a few make promises or take equity positions, but only to hold out on actual action. What these potential investors do not overtly express is that they see the decaying social contracts and poor central planning as it exists.
The narrative of social contracts indicates the understanding that governance and citizens have created on who pays for public infrastructure, as well as the covenants which aim to sustain the condition of that public infrastructure.
Regrettably, misguided notions of social justice have abused the payment expectation on the citizen for public infrastructure.
While we believe in universal access to health, education and housing, such infrastructure has to be paid for.
While the premise is that governance should avail this public infrastructure, governance itself is confined to the following means of raising its revenue: property tax/levy, social service rates/charges, licenses for all forms of enterprise, central government grants, municipal bonds, and statutory fees.
All of these are actually fiscal measures that draw finance from citizens!
In effect, nothing is provided for free. Public infrastructure is always at a cost, and that cost is to citizens!
Unfortunately, this is not conventional understanding in Zimbabwe.
Why does this matter? The notion of infrastructure investment should be grounded on this understanding that no public infrastructure is free, and that it all has to be paid for.
Thus, the context of investment should emphasise that the tax payer will without fail, be the bearer of the cost of that infrastructure with regards to payback third party investment!
The ultimate guarantor of infrastructure is the benefactor citizen’s capability to pay for it; directly or through fiscal measures. This is the social contract that should guide public infrastructure provision.
Our misinterpretation of this payment expectation on the citizen goes way back to the first ever low income public housing projects, particularly the Kwekwe and Gutu-Mupandawana projects of 1983.
This was the first public infrastructure project in regards to housing under an independent government. It was a venture to study suitable tripartite Public Private Partnerships for public infrastructure provision.
It was not successful, the eventual cost of housing under what was initially intended to be a mortgage payment scheme, ended up being expensed to Beverly Building Society and the central government taking over more than 1,215 percent of its initial budgeted cost.
This was due to citizens not being held accountable to the mortgage payments on the houses they had signed up for. Indeed 1983 seems a long time ago, yet until this day, there is yet to be a sustainable payment model of a PPP nature.
Further alluding to this deficient payment expectation, the greatest debts to local governments nationwide in the last decade cumulatively remains unserviced debt by end users or benefactors of public infrastructure.
Indeed the then local government minister, Ignatious Chombo, directed all municipalities to cancel up to half a billion dollars of domestic water bills and property taxes incurred by households between February 2009 and June 2013, citing a difficult economic environment that made it difficult for households to pay.
Who compensated the investment that was made into the utility of that infrastructure for those four years? Within that one action, there was inevitably significant infrastructure investment default and loss.
In 2017, the notion of public housing is still perceived through the allotment of stands for free to non-evaluated recipients. Where is the payback model for any investment into that infrastructure?
Regrettably, we have abused the accountability of social justice, by making it distinct from the only kind of credible infrastructure financing; the kind that has a payment expectation on the citizen who utilises and is the benefactor of the infrastructure.
If universal access to public infrastructure is a social contract that is enshrined in our constitution, then so should the social contract of benefactor payment, otherwise, the entire model does not have a fit for any third party investor.
We are essentially seeking out an investor into public infrastructure, yet we are exuding no socially binding contract for payback.
It is not coincidence that the nations with the highest level of investment quality and investment per capita are also high achievers in terms of constituent accountability.
In his book, Antifragile, Nasim Taleb spoke on the decentralised governance system in Switzerland, which gives its local government’s effective mandate on constituent public infrastructure. Switzerland has the third highest infrastructure quality and investment per capita in the world according to the World Economic Forum.
Hong Kong and Singapore are also in the top five; consistent amongst these is the high level of constituent accountability in fiscal contribution. Ideally, the decentralised model works in a manner that apportions public infrastructure to the direct demands of respective constituents. A municipality gets what its constituents pay for!
Just this week, Minister Chinamasa opened such a narrative of decentralized infrastructure financing to the 92 local governments in Zimbabwe.
He said central government would allow local authorities with sound financial management systems in place to issue bonds and raise finance for infrastructural development.
While he spoke along ideally sound rhetoric, he significantly downplays two factors: first, the deficient payment expectation on constituents within our local governments as aforementioned. Secondly, he discounts the poor central planning that is prevalent in decentralized local governments.
Local planning authorities across the nation are faced with many administrative and structural challenges. For instance, there is fundamental confusion on who owns the title for many pieces of commercial land on which there could be infrastructure investment.
Constitutionally, the Urban Councils Act and Rural Councils Act stipulate these terms, however, in most cases these legislative mandates are overridden, even amongst governmental entities themselves, for instance Harare City Council contesting central government.
Thus, from the onset, in cases where there is no certainty of title, the investment proposition drops to nil as no property rights exist to identify ownership.
Furthermore, in instance where title cannot be defined, there is no investment potential because while there can be private or trustee land within local governments, that private or trustee land can only be used for purposes that fit within the local planning authorities spatial plans e.g. Master, Local or Layout plans.
For example, a private consortium of investors cannot invest in a sports stadium or develop commercial property on a piece of land unless such economic or recreational activities are within the local governments planning.
Unfortunately, most local governments in Zimbabwe do not have concise master or layout plans of their own! So again, from the onset, there is no clear investment proposition in local governments.
Likewise, in instances local governments contest private investment, for example there is historic intrusion and insistence by municipalities for sports clubs like Dynamos to utilise public stadiums instead of granting permission to construct their own venues.
These matters should also allude to how disingenuous the Special Economic Zones thrust currently is. We have over 90 local governments, many lacking any spatial plans, yet we are speaking of them as potential investment propositions.
Local authorities faced with jurisdiction conflict also have unfunded mandates, which is when a local authority performs functions otherwise meant for provincial and central government, yet it bears costs from its own resources without getting commensurate compensation. Again, this is a financial matter of who is meant to payback initial investment into infrastructure?
Administrative challenges exist in terms of accessing developmental permits, certificates of compliance, and approved building plans.
Many developing structures across the country are not abiding by these standard operating procedures. The ones that do are losing economic value by paying a premium in comparison to non-compliant neighbours.
Consider that in Zimbabwe we perceive vendors as normal across our urban councils. For the foreign investor, it takes five minutes to comprehend that we have serious administrative breakdowns.
Investors are immediately turned off because what we see as normal through vendors, investors interpret as decreasing property values, yet property rates and taxes are still mandatory.
More simply, a minute’s stroll in any urban council in Zimbabwe shows the lack of municipal enforcement i.e. no rule of law in what are already existent economic zones.
Even in terms of economic valuations, shrewd investors notice the slow traction that local institutions make towards meeting benchmarks such as prescribed assets for life insurers and pensions. Property valuations and rentals have consistently been depreciating, reflecting low investment proposition for potential investors. These are downstream effects of poor central planning by respective local governments.
In 2014, central government started to look into offering independent power plant (IPP) permits. This was in response to criticism that most infrastructure investment was focused on rehabilitation of old industrial infrastructure such as Kariba and Morton Jeffery.
However, the investment allure of new industrial infrastructure remains weak due to no clear national industrial strategy by central government. There has been no empirical evaluation as to the economic value of the last industrial strategy, and there is no convince data on the potential of its successor.
Hence, there is no clear direction onto which industrial infrastructure investment can be lured in.
This is competition with other national industrial strategies such as South Africa’s Industrial Policy Action Plan (Ipap) which have been specific to incentivize a total of 3 384 private sector enterprises to the economic value of R13,6-billion.
Conclusively, Zimbabwe’s infrastructure deficit has two main explanatory narratives. It is the defunct social contracts that abusively perceive social justice as a subsidized apportionment of public infrastructure to an unaccountable benefactor. Hence, most public infrastructure initiatives fail to offer investment payback potential.
Also, it is poor central planning within the local governments that inhibit investment into infrastructure. Already carrying administrative and structural bottlenecks, the lack of progressive outlook for infrastructural design for the future make central planning unappealing to investment.

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