In September 2008, a Global Political Agreement (GPA) was signed between the then ruling Zimbabwe African National Union-Patriotic Front (ZANU-PF) and the two MDC factions of the Movement for Democratic Change (MDC), which made up the opposition. Five months later on February 11, 2009, a Government of National Unity (GNU) was formed with President Robert Mugabe as the Head of State and Morgan Tsvangirai, as Prime Minister, and a new Cabinet was sworn in on February 13, 2009.
On February 11, 2012, Zimbabwe marked three years of its Coalition government without an indication when the government of national unity will end. Outstanding issues from the GPA are yet to be resolved, amid calls for a new Constitution and new elections.
Since 2009, Zimbabwe’s economy has started to recover from a decade-long crisis that saw economic output decline every year during the period 1999 to 2008, for a cumulative decline of more than 45%. Supported by a strong recovery of domestic demand and government consumption, real gross domestic product (GDP) grew by 20.1% between 2009 and 2011. GDP was led by strong growth in mining (107%), agriculture (35%) and services (51%). Recovery in manufacturing sector (22%) has been markedly less vigorous. Strong external demand for primary commodities (platinum, gold, cotton and tobacco) has supported higher production levels, which have recovered pre-2000 levels in terms of values. Value of mineral exports increased by 230% over the 2009-2011 period, while value of agricultural exports increased by 101% over the same period. As production levels of tobacco, cotton and gold have not yet recovered to year-2000 levels, Zimbabwe has been unable to fully exploit the benefits of high international prices to boost exports further.
In 2011, real GDP was estimated to have grown by 9.3% following a nine percent growth in 2009. Growth in 2011 was led by strong growth in mining (50.5%), agriculture (17.1%) and services (16.3%). Growth in manufacturing sector (5.3%) performed below expectations. Services remain the biggest GDP contributor (46.1%), with mining (22%) now surpassing agriculture (15.6%). Transport and communications (13.8%) grew ahead of manufacturing (11.9%). Nominal GDP as of end 2011 is estimated at US$9.9 bn, with GDP per capita at US$698. However, the 2009-2011 economic rebound is slowing down, with growth estimated at five percent in 2012, being weighed down by the poor agricultural season, binding credit constraints, fiscal revenue underperformance and slow pace of economic reforms.
Annual average inflation remained moderated at 4.9% (y-o-y) in 2011 and four percent in the first eight months of 2012. The external position remains unsustainable. While supported by favorable international commodity prices, merchandise exports increased markedly by 35% from US$3,317 million in 2010 to US$4,496 million in 2011, imports grew faster (46.5%) and reached US$6,365 million in 2011 (preliminary 2011 data from RBZ) following a 60.7% increase in 2010 and 22.2% increase in 2009. Imports demand was dominated by fuel (16.5%), chemicals (15.4%), machinery (14.5%), and manufactured goods (12.1%). The current account deficit in 2011 remains elevated at 32% of GDP, financed by short-term capital inflows and accumulation of arrears. Foreign exchange reserves remain low at 0.6 months of import in 2011, well below the benchmark levels for dollarized economies. Errors and omissions remain high (US$1 billion), reflecting increase in unregistered remittances, unreported exports and unidentified financing. Foreign direct investment (US$125 million) and portfolio investment (US$80 million) are still subdued mainly due to poor business conditions and concerns over political instability.
Zimbabwe experienced strong fiscal recovery between 2009 and 2011, but the momentum is slowing down. Central Government Revenues have increased from US$970 million in 2009, to US$2.9 bn in 2011 (excluding diamond revenues), and representing 29.4% of the 2011 estimated nominal GDP. In real terms (constant 2009 prices), the 2011 fiscal revenues have surpassed the 1998-2001 average. Better than expected revenue performance in 2011 (US$2977 million), and lower capital expenditures helped manage the growing total expenditures of US$2895 million. As a result, the government managed to generate a small cash-surplus of US$41 million in 2011, largely offset by accumulation of domestic arrears to state-owned enterprises (SOEs), estimated at about US$150-200 million. Increase in the current expenditures was largely fuelled by increasing employment costs, which absorbed 63% of current expenditure, and corresponded to 12.8% of GDP in 2011. 2012 has seen the pace of revenue growth slowing down on the back of less than expected performance of diamonds revenues. At the same time expenditures are rising fast, being driven by employment costs (69% of current expenditure between January and August 2012)
The latest (September 2012) debt sustainability analysis confirms that Zimbabwe is in debt distress, with arrears to most creditors continuing to accumulate. At the end of 2011, total external debt is estimated at US$10.7 billion (113.5 percent of GDP), with most of the overdue obligations being owed to the World Bank (US$911 million), AfDB (US$ 587 million), EIB (US$244 million) and IMF (US$138 million). The analysis points to further worsening of the debt situation, with debt service including arrears remaining high in the medium term due to large size of arrears.
Growth in total credit to the private sector is leveling off. After sustained growth of 84.3% or US$1317 million, up from US$1563 million in November 2010 to US$2,881 million in November 2011, and credit to private sector stabilized at US$3,233 million in July 2012. Average loan to deposit ratio for commercial banks, which steadily increased throughout 2011 from 65% (January 2011) further increased to peak at 89% in December 2011 before easing to an average 85% between January and July 2012 credit growth, and rising levels of non-performing loans (which stood at 5.8% at the end November 2011 and 12% in June 2012), led to marked tightening of the liquidity situation especially in the final months of 2011 while the asset quality continued to deteriorate especially in 2012.
The recovery remains fragile as a number of issues stand in the way of sustainable economic growth. These relate to downside risks in agriculture, continued political uncertainty around the roadmap to elections resulting in low business confidence, lack of domestic liquidity and very high real interest rates on short-term credit, high wage costs and unrealistic wage demands driven by transportation, accommodation, utilities among others, ailing infrastructure (lack of resources to rehabilitate infrastructure and unreliable power supply. Downside risks also include possible compression for exports due to the unfolding slowdown of the global economy, potential distabilising effects of the indigenization programme on the economy and disorderly unwinding of vulnerabilities in the banking sector.
In 2011, the government presented a Medium-Term Plan for 2011-2015, which attempts to set the stage for Zimbabwe’s further recovery. Economic management has however recently become more difficult and fractured, with some policy setbacks associated with the fast-track indigenization on the key sectors of the economy, increased vulnerability of the banking sector, and financing of non-priority expenditures.
Following the request by the Ministry of Finance for an International Monetary Fund (IMF) Staff-Monitored Programme, progress has been made with regards to the outstanding marker for the initiation of the SMP (implementation of the 2010 payroll audit) and resumption of payments to the Poverty Reduction and Growth Trust (PRGT) (SDR 3.3 million in 2012). The IMF staff encouraged the authorities to raise efforts in improving macroeconomic management, regulation and supervision of banks and regular payments to the PRGT.
Analytic Multi-Donor Trust Fund
The Zimbabwe Analytic Multi-Donor Trust Fund (MDTF) allows development partners to coordinate their analytical and technical assistance in Zimbabwe. MDTF products will help better inform the government, development partners, and the public, and consequently promote transparency, accountability, and reform. Its main objective is “to establish the groundwork for re-engagement by development partners in Zimbabwe through analytical work on the key development challenges facing Zimbabwe, development of suitable instruments helping the Government of Zimbabwe and donors to respond quickly to changing country conditions and improved donor coordination.
The MDTF is governed by its contributors and managed by the Trustee, the World Bank. Two operational bodies govern the MDTF: a Policy Committee (PC) comprising the contributors and the United Nations Resident Representative, and three Technical Review Groups (TRGs), comprising technical experts of Development Partners and the United Nations. The PC determines priorities of analysis, while the TRGs translate these priorities into concrete study proposals. The World Bank hires consultants, supervises work and produces policy notes summarizing the analysis and incorporating stakeholder perspectives.
The MDTF is currently funded by 12 donors including the World Bank. During the period 2008-2010 the MDTF received US$7.9 million. A further US$11.86 million has been committed for 2011-2012.
The A-MDTF Results So Far
- Since 2008, the MDTF has supported analytical work and technical assistance across the following six sectors: Economics, Public Financial Management, Governance and Anti-corruption, Agrarian issues; Infrastructure; Basic Services; and Social Protection. The MDTF has also supported a broad range of workshops and conferences to share and disseminate study results, as well as two Cabinet Retreats (Victoria Falls, April 2009, and Nyanga in August 2009).
- A-MDTF resources, which provided the basis for understanding the status of selected sectors of the economy, supported dialogues on important economic issues towards formulation of a common agenda, such as such as Short-Term Emergency
- Recovery Programme (STERP) provided advisory service towards improving government capacity to implement systems such as the Integrated Financial Management Information System/Public Financial Management Systems (IFMIS/PFMS) that resulted in decentralization of financial management to line ministries and has resulted in increased financial management, accountability and transparency. Baselines were also created for some sectors, including agriculture, health and social protection and external resources were leveraged for investment, such as computerization of the PFM.
- The combined impact of these interventions was the introduction of relevant policy and reform agendas into the policy debate (such as through public expenditure notes, and the payroll study) and provision of advisory services to help raise the relevant issues under relevant sectors, including through the production of a series of public expenditure notes.
The A-MDTF Future Work Programme
Over the 2012-2013 period, the thematic focus of MDTF work will be primarily on three sectors; economic management and governance, including private sector development, public sector management, and public financial management, the agrarian sector, and infrastructure. Within these sectors, the MDTF will:
- conduct analytical work on issues such as: medium-term planning; public financial management; agricultural development; improving water and power supply; investment climate for business; civil service reform; management of mining assets; and regulatory reform.
- help build government capacities and strengthen core systems.
- promote donor synergies, share knowledge and facilitate greater harmonization of efforts relating to investment planning and implementation.
- contribute to aid effectiveness in Zimbabwe, and where possible reinforce the aid coordination architecture in the country.
The A-MDTF resources are being used to finance analytical work to help inform government’s economic policies, support business environment reforms, as well as for helping to enhance government capacity. As mentioned above, the A-MDTF supported the first Government of National Unity Cabinet retreat which assisted the Zimbabwe government to formulate action plans for the Short-Term Emergency Recovery Plan (STERP). This was followed by a consultative meeting with stakeholders -- a process which gave government an opportunity to hear stakeholders “views and concerns regarding economic stability, food security, restoration of basic services, guaranteeing of rights and freedoms and improving international relations.” The outcome of the meeting was a 100-Day Action Plan which was officially launched by Prime Minister Morgan Tsvangirai, on May 13, 2009.
The Bank is leading donor efforts to help build up the stock of knowledge about the economic situation and develop policy options for reform.
Work on Economics and Governance has aimed to:
i. Make substantial progress in initiating re-building of PFM systems.
ii. Provide strategic advice on prioritization of public expenditures (budget preparation,
infrastructure and social spending).
iii. Initiate dialogue in key and sensitive sectors of public management (civil sector
reform, management of mineral resources, and management of parastatals).
iv. Promote initial knowledge generation by promoting the first complete firms dataset on
Zimbabwe’s competitiveness and private sector development.
Building on the current progress in building better governance and public sector capacity, further work has been planned on:
- "Phase 2" of the process of strengthening the PFM/procurement systems and support to Public Accounts Committee of Parliament, Auditor and Accountant Generals offices
Next steps in HR management and public sector performance.
Further work to support increased competitiveness and employment includes helping buildeconomic management capacity as a key ingredient to improving the economy’s competitiveness and employment-generating capacity, specifically through helping to:
- Strengthen institutions and data for sound economic management;
- Strengthen parastatals policy
- Manage mineral resources for long-term development
- Capital budget implementation as a key element for future recovery
- Further building knowledge of opportunity for future growth by exploring challenges and opportunities for regional dynamics such as through the Southern Africa Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA).
In the education sector, the Bank has focused on supporting the Ministry of Education, Sports, Art and Culture (MOESAC) to develop a strategic and financeable Education Sector Plan which includes a one-year “emergency plan” to serve as an input for the FY11 budget discussions, and concurrently the five-year Medium Term Plan (2011-2015). To do this, the Bank financed and organized with the MOESAC a series of stakeholder consultations across the country, and provided technical assistance to a core team to analyze progress against previous plans, existing data, and establish key priorities for investment. The outcome of this support to date is the draft one-year plan which was presented to the cabinet in early September.
Moving forward, the Bank intends to continue working with the MOESAC and development partners to finalize the one-year plan and budget and to develop the information-base to ensure accurate costing and implementation plans support the five-year plan. To this end, the Bank is discussing with the MOESAC and donors the following activities and analytical work:
- Continued Technical Assistance for Developing the Sector Plan and Budget: The team will work with the MOESAC and development partners to complete the five-year plan and its supporting budget. The same team which helped the MOESAC team generate the draft one-year plan will provide guidance and ensure analytical rigor.
- Nationally Representative School and Facilities survey: This survey would be conducted as early as feasible in 2011 and would include modules on existing infrastructure and other physical assets, teachers, enrolments vs. attendance, the collection and use of fees and levies, and student learning. The survey will produce reliable and valid information to allow for costing an investment and rehabilitation program, and to provide the Ministry of Finance and Donors the confidence that the plan is credible and financeable.
- Strengthening the Education Management Information System (EMIS): With the United Nations Education, Scientific and Cultural Organization (UNESCO) and Association for the Development of Education in Africa (ADEA), the Bank will help re-build and capacitate the existing system in order to allow for generating accurate and timely school-level information on teachers, students, learning materials, funds flow, etc., which would improve overall system monitoring and reporting.
It is urgent that the MOESAC provide its final clearance to allow the survey and Education Management Information Systems (EMIS) work to proceed.
In social protection the Bank has focused on key policy and operational issues through the following activities:
Public Works: Through support from the Rapid Social Response Trust Fund, is assisting the Department of Social Services in the Ministry of Labour and Social Services to develop a public works policy framework and operational guidelines to be finalized by December 2012. This will assist in coordinating all public works/food for work related activities implemented by all stakeholders and implement a labor intensive public works pilot program, designed to provide temporary employment opportunities to unemployed people in Zimbabwe, while at the same time building community assets supportive of productive activities. The ongoing pilot will also provide practical lessons to support a national scaled up program and also feed into the finalization of a public works policy framework and operational guidelines.
Policy and Capacity Development: The Bank provided technical assistance to the Ministry of Public Service and Social Services for the development of a national social transfer policy framework. The framework has been finalized and adopted by government.
Going forward the Bank will continue to offer technical and operational support to the sector and currently plans are underway with resources permitting to support government to undertake a review of the social protection sector with the objective to analyze the efficiency of current social protection programs in reaching the most vulnerable population, and develop policy reform options and provide guidance on how to improve the efficiency of the social protection system to reach the most vulnerable population. The findings of the review will contribute to the development of the overall social protection policy and also increase the awareness and understanding among key stakeholders of the coverage, efficiency and effectiveness of social protection programs.
In the health sector, the Bank is preparing a new project with funding from the Results Based Financing Trust Fund. With the aim of increasing the capacity for service delivery in the areas of maternal and child health, the US$15 million results-based financing (RBF) grant to restore primary health service will be designed and implemented in all rural districts. This grant will support the abolishment of user-fees for selected services and thereby increase access to health services for the poor. Financing will be channeled through a non-state entity which directly contracts public and mission health service providers. The grant is targeted to increase the coverage of key maternal and child health interventions, build capacity and improve accountability in health service delivery with the aim of revitalizing the health system and increasing its results-focus.
The ongoing analytical work in the health sector has focused on key issues in the sector. This includes the ‘investment case for health’ analysis, providing an analysis and costing of priority interventions in the sector and human resources for health. Ongoing analytical work has a focus on health financing, human resources for health and private sector approaches to health care. The following studies were carried out:
- National Integrated Health Facility Assessment: Will be used to inform policy on health system issues, particularly human resources for health, supply chain, quality of care, infrastructure, client satisfaction and user fees. The results will be also used as a baseline to support the development of new health projects (RBF, Infrastructure project).
- National Representative Household Survey: Will focus on demand side issues in health, including out of pocket expenditures and health seeking behavior. The results will inform the policy dialogue and contribute to the design of new health projects.
- Private Sector Investments for Health: Given the investment needed to revitalize the health system, the World Bank, in collaboration with IFC, will explore innovative mechanisms to attract investments to the health sector through e.g. Public Private Partnerships. As part of this work, a private hospital assessment will be conducted.
- Nutrition: Stunting among children has increased to alarming levels in recent years with adverse consequences for mortality, long-term cognitive development, school performance and adult economic productivity. The World Bank will continue to be involved in this strategic area and ensure that nutrition interventions become an integrated part of the RBF intervention and the service delivery package provided at the primary level.
- Results-Based Financing Program (RBF): The RBF introduces innovative health financing approaches to accelerate the availability, accessibility and utilization of quality health services at district and rural health centre level, with an emphasis on maternal and child health care. The RBF program provides subsidies, directly linked to performance in the form of quantity and quality of services delivered at primary health care level. It is being implemented within the National Health Strategy of Zimbabwe (2009-2013). To date, 387 health facilities have been contracted, of which 32 are hospitals, covering 29% of rural health facilities in Zimbabwe. 51.4% of all facilities is council owned, 36% by the MoHCW, 11% is church related and 1% private. The project is overall rated satisfactory by the World Bank. The ratings are based on Implementation Progress and Progress towards the Development Objective.
Health Systems Strengthening: In order to strengthen the health system, the World Bank together with the Ministry of Health and Child Welfare (MOHCW), commissioned a rapid Provincial Health Executive (PHE) assessment and a supportive supervision assessment. This was to provide support to the strengthening of the Provincial Health Executives (PHE), in particular regarding their competencies in Human Resources Management. The aim of this capacity strengthening effort is to enable the PHE to address Human Resources for Health (HRH) issues at provincial level, thus complementing on-going capacity strengthening efforts for district health managers. The ultimate goal is to improve strategic planning and management of HRH at the decentralized levels in the health system. Modular training will be done to strengthen the PHE management skills and capacity. Standardized supportive supervision tools are being developed and these will help bring back the quality of care in the rural health facilities.
Public Sector Management and Governance
Over the last two years, the Bank has focused on undertaking a number of analytical studies under the A-MDTF and providing technical assistance to a Civil Service Audit. Going forward, the Bank is planning to provide support in four complementary areas of public sector management:
- Implementation of the Civil Service Audit and broader Human Resource Management (HRM) reform: Following the completion of a Payroll and Skills Audit, the Bank will assist the government in implementing the recommendations to ensure: a clean payroll, adequate controls to maintain the integrity of the payroll, and comprehensive human resources (HR) records. Once there is consensus within government, the Bank is prepared to design a project to modernize the payroll system through integration of payroll with the Integrated Financial Management Information System (IFMIS). To support HR and payroll management, an electronic records management system will be put in place, designed with the ability to provide a records-management function to all departments across government.
- Compensation and Employment:The wage bill has reached an all high of 66% of revenues in 2011, crowding out capital spending and other recurrent costs. The Bank will provide technical assistance to the development of a medium-term framework on compensation and employment to achieve a sustainable wage bill. The support is intended to facilitate multi-stakeholder policy dialogue and improved policy making on wage and employment issues.
- Public Investment Management: The under-execution of the capital budget, and thus limited support for the social and economic recovery of the country, is of increasing concern. It is within this context that the Minister of Finance in early 2011 asked the World Bank to assist in strengthening the capacity of Government to manage and implement the capital budget. From a public sector governance perspective, the Bank will support government with implementation support for a few strategic public investment projects under the 2011 budget, drawing on a rapid results approach. In addition, a diagnostic assessment will provide an initial review of the prevailing systems, policies and procedures for public investment management; i.e. the strengths and weaknesses of the implementation arrangements for the Public Sector Investment Programme, drawing on a pragmatic and objective diagnostic approach to assess public investment management systems in government.
- The Report on Observance of Standards and Codes (ROSC) in Accounting and Auditing in Zimbabwe has been completed, approved by the government and published. A country action plan for the implementation of the policy recommendations of the ROSC report is currently awaiting the approval of the Ministry of Finance.
- Advisory and Technical Support to Public Financial Management. The Country Integrated Fiduciary Assessment (CIFA) funded by A-MDTF was commissioned in February 2011 as a diagnostic study of the PFM system and Public Procurement in Zimbabwe. The purpose of the CIFA was to determine the extent to which the PFM system in Zimbabwe ensures aggregate fiscal discipline, along with supporting resource allocation and utilization, the delivery of public services, financial accountability and transparency. The reports show that the PFMS and procurement practices at the time of the assessment (mid 2011) did not meet several of the major benchmarks. Aware of the deterioration in the PFM and procurement systems in the country (even before the CIFA exercise), the development partners agreed to put in place interventions that will help to improve upon the PFM and Procurement Systems in the country. There has been a remarkable improvement in Accounting and financial reporting following the operationalization of the IFMIS. Monthly and quarterly financial statements are being produced and published (Gazette). The A-MDTF is now aiming at strengthening the Audit office to be able to audit the financial statements and public accounts. In addition, the Fund aims at capacitating the Public Accounts Committee of Parliament in order to improve its oversight roles in ensuring transparency and accountability.
Substantial progress has been made with respect to strengthening of capacity of State Procurement Board. Public procurement systems require significant overhaul, improvement and capacity building. Capacity needs assessment of the State Procurement Board has been done. The consultants are yet to submit their report. The capacity needs assessment is aimed at capacitating the Board to be able to implement procurement reforms as recommended in the CIFA report. They are being provided with skills with which they can supervise the other entities and carry out their oversight responsibilities. The TF will fund the provision of advisory services to enable the government to amend the procurement act, decentralize public procurement, and provide for Public-Private Partnerships, procurement in Local Authorities and also to bring it in line with good international practices.
Low levels of infrastructure investment over the past decade have lead to a dramatic deterioration of the country’s competitiveness and poor service delivery. Energy demand – estimated at over 2,000 MW – far outstrips supply, at less than 1,200 MW, leading to black-outs and unreliable services. Half the trunk road system is in a poor state. Water supply and sanitation services, once the envy of the continent, have deteriorated dramatically resulting in the 2009 cholera epidemic that caused 4,300 deaths and over 100,000 cholera cases.
The government recognizes the centrality of infrastructure to its future growth as shown the 2012 budget allocation for capital works. The government is trying to attract investment to address the estimated US$14 billion capital works needed over the next decade to restore the countries’ infrastructure and attract investors. The Bank is supporting the infrastructure sector through analytical work funded under the A-MDTF and the Beitbridge Urgent Water Supply and Sanitation Project funded by the State and Peace-building Fund.
To date, analytical work has focused on critical activities in the water sector, whereas it is proposed that future A-MDTF funding addresses all infrastructure sub-sectors, including energy, transport and urban development. In order shift from the emergency/humanitarian focus to the more transformational agenda, it is proposed to scale-up activities in the water and energy sector and add activities in transport and other infrastructure areas such as urban development and improvements to the regulatory framework and Public-Private Partnerships (PPPs). Development of future activities in support of the strategic priorities of the A-MDTF will be undertaken over the next two months as part of the development of the Interim Strategy Note (ISN), and the review of the government’s 2012 capital budget.
While there are common themes across infrastructure sectors, the following are specific issues within the key infrastructure sectors: energy, water and transport.
Zimbabwe’s power sector plays a strategic role in enabling and promoting economic activity across the economy and in the delivery of key social services. Because of its geographic location, Zimbabwe’s power network infrastructure is also vital to the movement, or “wheeling” of power to and from neighboring countries within the Southern Africa Power Pool. While the Zimbabwe Electric Power Supply Authority (ZESA) was amongst the top three performing utilities in Sub-Saharan Africa until about 2000, today the power sector in Zimbabwe is in a seriously compromised physical and eroded financial state. This situation is mainly due to several years of rapid and continued deterioration of the power sector’s financial and cash flow position, dilapidated infrastructure conditions on account of a lack of resources to meet current expenditures and to perform required maintenance of generation, transmission and distribution systems on a timely basis, the severe economic crisis (hyperinflation and price controls) also rendered the utility technically insolvent and unable to pay either its trade creditors (electricity imports) or to service its external debt and the dramatic loss of “brain power” in the country led to a deterioration of institutional capacity, which has gradually eroded ZESA’s prior reputation for efficient management and financial practices.
There is an urgent need to rehabilitate existing energy asserts to restore system stability and security; as well as to improve the financial performance of the utility.
Rehabilitation of Energy Assets: There is a risk to the Hwange power station due to the weakened ash dam retention wall which requires urgent maintenance. Investments are needed to repair the ash dam retention wall at the Hwange power station to avert potentially serious damage to plant and life and repair critical items at Kariba to ensure dam wall safety. Investments are also needed to restore generation capacity at Hwange (from about 400MW to 700MW), and ensure continued reliability at Kariba and transmission and distribution system investments are required to reduce outages, limit damage due to malfunctions and restore system stability.
Improving financial viability: Due to a long history of uneconomic tariffs, and despite recent tariff adjustments, the power sector utility is still financially insolvent (ZESA revenues this year are not enough even to cover payroll costs). One of the main priorities is to restore the financial viability of the utility by improving electricity cash flows/revenue generation. There is also a need to implement broad policies and institutional reforms to create and support a commercially oriented business environment. Sustainable development of the sector also requires an assessment of opportunity costs of supplying electricity factoring in efficiency improvements when taking decisions about capacity expansion.
Possible Bank Support: The African Development Bank (AfDB) is financing an emergency power rehabilitation project. Under the A-MDTF the Bank has developed two concept notes for technical assistance:
- (i) Energy Sector Investment Framework will provide a framework for all short-and medium-term energy investments (generation, transmission, distribution) to guide Public Sector Investment.
- Programme (PSIP) and other financiers to improve resource allocation
- (ii) Technical Assistance (TA) to energy sector for Kariba rehabilitation: Technical Assistance to the Ministry of Energy to improve project management of rehabilitation of Kariba power plants.
Zimbabwe’s water sector faces formidable challenges. It has been badly hit by the economic down turn and the lack of investment has reversed many of the sector reform gains. Many major towns and cities in Zimbabwe are upstream of their drinking water sources and this has led to high pumping and water treatment costs and huge pollution loads. Most government institutions lack reliable water services data, however Government figures for 2008, estimate coverage in the range of 46% access to improved drinking water and 30% to improved sanitation facilities. Significant gains in infrastructure rehabilitation have been made since the Declaration of the Emergency in 2009, but there are still major challenges including aged infrastructure, demand outstripping supply, high non-revenue water (estimated at 57% for Harare), poor billing and low revenue collection rates, weak institutional capacity and generally low funding. Open defecation have soared to 33% nationally. The deterioration of water and sanitation services in Zimbabwe resulted in a cholera outbreak in 2008-2009, in which over 100,000 cases were recorded and over 4,000 lives were lost. Beitbridge, located along the border with South Africa was one of the worst affected towns, accounting for 26% of all cholera cases recorded nationally.
These problems have been exacerbated by outdated policies and strategies and complex institutional arrangements. Zimbabwe has been isolated from engagement in sector and regional debate in recent years and many of its policies do not reflect current sector thinking. The government acknowledges the existence of these problems and is prepared to update and/or put in place new water policies and strategies, and regulations for the water sector
Bank Support to the Water Sector:
With the objective of building the Bank’s knowledge and facilitating dialogue in the water and sanitation sector, the Bank supports the government in selected high-priority technical assistance activities. Activities are divided into analytic work and limited direct support to Water Supply and Sanitation (WSS) services.
With grant of US$2.65 million from the State and Peace Building Fund (SPF), the World Bank is supporting an emergency water supply and sanitation operation in Beitbridge. The project was launched in March 2011 and is expected to be completed in 18- 24 months and will benefit 40,000 people with improved water supply and sanitation services.
Government requested the World Bank, Water and Sanitation Program (WSP) and UNICEF to lead the development of water sector policy background papers. Eleven sub-background papers were produced and these have been consolidated into 3 background papers covering water resources and irrigation; urban water supply and sanitation; and rural water supply and sanitation. In consultation with government and its water sector coordination structures within the National Action Committee (NAC), the background papers have been consolidated into one paper that will be used as a basis for the next phase of a government led policy consultation and write up process. The World Bank has been requested to provide further technical assistance in this government led second phase. The draft National Water Policy has been finalized, and will be sent to Cabinet in the coming weeks.
The urban waster tariff study has been finalized and presented to government. Information gathered in this Tariff Study was used as input in the development of water sector policy background papers.
The Dam Safety study focusing on 25 large government dams is progressing well and has highlighted some of the urgent works that Zimbabwe National Water Authority (ZINWA) needs to focus on.
The Technical Assistance to Harare in the form of capacity support to Harare’s water treatment plants and wastewater treatment plants is in progress.
Rapid Assessment of Small urban towns was completed and shared with stakeholders.
The following technical assistance activities have been recently approved, and are now underway:
- a. Water Sector Investment Framework: will provide a tool for the Bank, Development Partners and Government to better prioritize investments in the sector in the short, medium and long term to restore water services and plan for future growth of the sector;
- b. Greater Harare Water/Sewerage Strategic Plan will follow-up on the initiative of the Prime Minister and Mayor to provide technical assistance to the City of Harare to develop a Strategic Plan to restore water services in the short-term, and expand and improve services in the long-term.
- c. Technical Assistance for Improving Water Quality Management and Monitoring will follow up on the National Water Policy with the Ministry of Water Resources Development and Management assess pollution hotspots
- d. Flexible Technical Assistance in Infrastructure to provide a structured framework for the World Bank’s response to rapid TA requests from infrastructure ministries, and to provide a forum for promoting international best practice, and show-casing Zimbabwe best practice in the water sector.
The Bank has maintained an infrastructure sector dialogue since Zimbabwe went into non-accrual status in 2000 that includes specific focus on transport, with the main objective of continually filling the knowledge gap and guiding policy and investment choices where possible. The dialogue has taken different formats and the first tangible result was the Zimbabwe Infrastructure Assessment Note (ZIAN) of 2006 which reviewed and identified policy, capacity and financing concerns in roads, railways, water and sanitation. Following the government’s request for an expanded review, the Bank prepared the Zimbabwe Infrastructure Dialogue (ZID) report in June 2008. ZID dwelt on policy and infrastructure matters, focusing on roads, railways, water, energy and telecommunication sub-sectors. ZIAN and ZID formed the basis for subsequent consultations with the infrastructure sectors during the Public Sector Investment Program (PSIP) review of 2009. The output was the consolidated report which included investment and policy recommendations for the transport sector that informed the compilation of the 2010-2011 PSIP. One of the outcomes of these consultations was the need to improve road sector revenues through a review of the existing road user charging system, but this work could not be funded due to MTDF financial constraints and priorities. The importance of a well performing transport sector especially to underpin Zimbabwe’s economic turnaround cannot be overstated. Furthermore, it would be expected that a more robust economy would induce additional strains and stresses on the transport infrastructure. This interplay between the transport infrastructure and Zimbabwe’s economic performance requires judicious management.
The government has asked the WSP to assist in benchmarking urban water, sanitation and solid waste services, covering all 32 urban local authorities. This initial phase will assist government develop a benchmarking framework that will also identify critical water, sanitation and solid waste service indicators.
The development of the agricultural sector will be essential in contributing to and restarting the process of structural transformation of the Zimbabwean economy. Higher productivity in the agricultural sector can fuel a broad-based process of economic transformation and long-term growth with agriculture taking up again its role as a supplier of savings, labor and inputs to other sectors, and contributing to food security and exports. In 2008, Zimbabwe harvested less than 30% of its cereal grain requirements as a result of drought, and a shortage of farm inputs. While grain harvests increased the following year to 65% of national requirements, most smallholders were still struggling to purchase seed and fertilizer, and availability of these inputs on retail markets was severely limited. A grant from the Global Food Crisis Response Program (GFRP) supported the supply of fresh maize seed to over 300,000 farmers. This contributed to the 20% increase in national maize area during the 2009-2010 cropping season. In an experimental program, 10% of the seed was provided through vouchers redeemable through retail shops. This was successful enough to convince government and development partners to allocate most inputs to smallholders through voucher based systems during the 2010-2011 cropping season. Since the 2009 harvest was affected by drought, a State and Peace Building Fund (SPF) grant is supporting the delivery of fertilizer through vouchers redeemable at retail shops to at least 125,000 smallholder farmers at the beginning of the 2010-2011 summer cropping season. Of particular importance now is to address the issue of how to move from humanitarian based assistance to market based responses to spur agricultural growth in the country.
The persistent vulnerability of the new agricultural sector to shocks has been evident in the agricultural year 2011-2012, as late onset of rains, and prolonged intra-seasonal drought, and the decline or late arrival of subsidized or free inputs have led to the write-off of about 45% of the potential maize harvest. The very recent decline in international prices of cotton and tobacco and the slowdown in agricultural growth between 2010-2011 and 2011-2012 indicate that the sector, as in the past, remains vulnerable to drought and international price volatility which will need to be addressed by appropriate policies and programs. Agriculture productivity and profitability need to recover for rural incomes to improve. This recovery would depend on how much progress can be made in addressing several areas of concern, which includes, among other things, targeted investments in infrastructure and service delivery (irrigation rehabilitation, transport, markets, research & extension, etc.) and, importantly, resolving the persisting land issues and tenure insecurity.
With funding from the A-MDTF, the Bank continues to support a national dialogue on the revitalization of the agricultural sector. This funding supported drafting of a series of papers reviewing the status of the agricultural sector, and strategies for food security and market development which provided a foundation for a national agricultural conference in late 2009. This was the first time in recent years that the government has pursued an open discussion on national agricultural strategies with a wide range of national stakeholders. A-MDTF funding has allowed this to be followed up with a major agricultural sector assessment study which offered a strategic review of sub-sectoral growth opportunities. The Bank, with support from the A-MDTF, is currently supporting a number of measures to enhance the agriculture sector performance by providing assistance to the country-led Comprehensive Africa Agriculture Development Programme (CAADP) process to develop a strategic framework for a prioritized agriculture investment plan, and promote coordinated support toward the implementation of this plan, identifying strategies, regulatory, and policy options to strengthen market linkages to help small-holder farmers transition from subsistence agriculture to more commercially oriented production systems (e.g. through contract farming models), and outline options for improving the efficiency, productivity and sustainability of sector investments (irrigation, livestock, horticulture, etc.). Support to the CAADP process is starting to yield results. The draft CAADP Strategic Framework, Investment Plan and Compact, which are in the final stages of drafting, have and will continue to form the basis for stakeholder dialogue and agreement on investment priorities and policy reforms required for CAADP implementation.
Lastly, A-MDTF support has facilitated an opening of the dialogue on land reform. The Bank funded a major review of agricultural land reform process and result to date, leading into a discussion amongst development partners about policy options for stabilizing land markets and improving utilization. This has led to a request from government to the development partners in early 2012 to mobilize resources to provide assistance towards the design of a program and action plan to address priority land issues. In close consultation and collaboration with development partners and the government, the Bank plans to make progress in supporting the design of this program, by conducting analytical work which will outline options for key legal and regulatory adjustments summarizing best practice and decision options relating to land tenure, land valuation and compensation, land conflict/dispute resolution systems, land administration, and land use planning and productivity. The program aims to culminate in a more equitable, transparent and efficient distribution of rural land resources and a consequent reduction in borrowing and transaction costs which will help unleash the agricultural potential of Zimbabwe.
Environment and Natural Resources
Zimbabwe’s economy is highly dependent on its vast natural resources base that is facing increased degradation. Large proportions of the poor rely heavily on natural resources for their livelihoods. This is more pronounced in rural areas where 70 percent of the population and the majority of the poor live. In fact, in rural areas, access to natural resources will remain an important determining factor in improving the livelihood of the rural population. To a large extent, the economic recovery is now driven by the performance of natural resources-based sectors. Thus, at least in the short run, the overall economic revitalization of Zimbabwe will depend on these sectors.
The economic crisis that the country underwent in the 2000s has resulted in low capacity utilization of productive sectors, such as agriculture and manufacturing, which in turn has intensified the exploitation of the natural resources base. As a result, the environment sector is facing a number of problems including deforestation and forest degradation, land, air and water pollution, soil erosion, land degradation and loss of biodiversity including poaching, as well as contamination and pollution from poor mining practices with toxic waste and unabated and excessive exploitation of groundwater.
Increased degradation of the natural resources base is already taxing the economy. Loss of productivity attributable to land degradation alone is estimated at 13% of the entire national potential. The degradation is concentrated in the heavily-utilized communal areas, which complicates further the task of improving the living standard of the poor.
In addition, Zimbabwe is faced with frequent droughts and there is a wide consensus that droughts would become frequent and intense as a result of climatic change. There are also signs of reduction in water replenishment and intensification of exploitation of groundwater that has increasingly become the main source of water. Given the degradation that the forest resource of the country experienced coupled with the impact of climate change, the United Nations Framework Convention on Climate Change (UNFCC) made the observation that: “the rivers in the Eastern Highlands of Zimbabwe that are today well watered and perennial [will] develop flow regimes similar to those currently experienced in the dry regions i.e. seasonal rivers…”
Additional important issues facing the environment and the sustainable management of the natural resources include: the management of Persistent Organic Pollutions (POPs), incursion into PA and parks and an increasing tendency to shift land to farm especially in the sleepy slops where farming is not supportive of sustainable use of the resource. Weak institutional capacity and lack of enforcement of existing laws is also contributing to the problem in that those activities that have a lasting negative impact could proceed unregulated and uncontrolled. These factors jointly have a high probability of endangering sustainable economic development of the country in the future. To complicate the issue further no major work has been done on the state of the environment since 1998 and as a result available information is dispersed and incomplete.
To support the government’s effort in addressing the problems facing the environment sector, through Global Environment Facility (GEF) financing, the Bank has started the preparation of an Environmental Management and Conservation project. The project will support: improvement in capacity in environmental resources management; enhancement of protected areas management; providing small grants to alternative livelihood activities that will contribute to sustainable management of the environment; addressing land degradation; and sustainable forest management in selected landscape. The Bank will work closely with Ministry of Environment and Natural Resources Management and WWF in the preparation and implementation of the project under preparation. Other donors will be contacted to coordinate support to the environment and natural resource management in Zimbabwe and to complement/finance the proposed project. The Bank will also seek additional resources to provide technical assistance for identification of incentives mechanism for the private sector investment in renewable energy development and sustainable timber production and use – including support to policy improvement and strengthening of enforcement capability.
Zimbabwe used to have a vibrant tourism sector that has rebounded relatively quickly in the last three years from the downfall experienced in the 2000s. The sector will require additional investment to rehabilitate degraded infrastructure that will allow the country to realize the full potential and comparative advantage it has in tourism. A technical assistance in improving capacity and prioritizing investment needs, both in the private and public sector, will be pursued. In addition, on demand-driven bases, TA to Ministry of Tourism and Zimbabwe Tourism Authority will be provided to improve and clearly define policy and economic empowerment issues as they apply to tourism industry.
Vast areas of Zimbabwe fall under arid and semi-arid climate condition and the country is experiencing frequent drought mainly as a result of climate change. Water has become a critical factor not only for human use but also for economic activity, mainly agriculture, livestock ranching and wildlife management. As perennial rivers change to seasonal one, groundwater use and exploitation has intensified. However, the potential, extent of use and in general the dynamics of groundwater and the characteristics of the aquifers are not well understood and existing information is rudimentary to inform decision and policy making. As part of GEF financed Southern African Development Community (SADC) Groundwater Management Project, which is under preparation, the World Bank will support Zimbabwe in improving the management and use of its groundwater resources.