Omega Ukama 
THE construction sector’s offshore borrowing increased a hundredfold to US$293,8 million in 2020, from US$2,9 million in 2019, data released by the Reserve Bank of Zimbabwe (RBZ) shows.
It comes as the country’s deteriorating economic environment, headlined by high inflation and currency volatility, has kept domestic lending at a minimum.
The official data, which was released a fortnight ago, shows that the construction sector accounted for 22 percent of the country’s external borrowing in 2020, up from only 0,28 percent in 2019.
The sector has lately seen an uptick in projects. Masimba Holdings, a Zimbabwe Stock Exchange-listed construction company reported that its revenue doubled to $666,13 million during the half-year to June 2020 from $320,68 million during the prior comparable period, “mainly driven by an increase in road and civil projects”.
Treasury estimates that the construction sector declined by 11,4 percent in 2020. This was, however, an improvement from a decline of 14 percent recorded in 2019.
The sector is expected to grow by 7,2 percent this year, and the government has budgeted $30 billion for infrastructure projects, up from about $3 billion in 2020.
Meanwhile, RBZ data shows that domestic lending to the sector has been low, constituting only 0,54 percent of a $82,4 billion aggregate loan-book, as at December 31, 2020.
Mashonaland Holdings, another listed construction firm, reported last year that a depressed mortgage market in the country has made acquisition and development of property “challenging”.
The RBZ says domestic lending, in general, has been low.
“The average prudential liquidity ratio for the banking sector remained high at 73,1 percent, reflecting in part, the cautious approach to lending by most banking institutions, especially in foreign currency,” RBZ governor John Mangudya said in his 2021 monetary policy statement.
“Banking sector financial intermediation remained subdued, as reflected by a loans-to-deposits ratio of 39,5 percent, largely as a result of cautious lending approach adopted by some banking institutions,” he added.
This has created liquidity challenges for businesses in various sectors. Capacity utilisation in Zimbabwean mines is this year seen increasing by 20 percentage points to a record 80 percent in anticipation of firm commodity prices, but the sector could do much better if funding can be improved, a survey by the Chamber of Mines found last year.
According to the survey, most mines are planning to ramp up production in 2021 with only 10 percent expecting to remain the same.
“This is premised on the assumption that access to capital will remain a challenge just like in 2020. When further interrogated what would happen if access to capital improves, most respondents indicated that they would be able to further improve their output,” reads the survey report released in October.
The situation is made worse by the fact that the southern African nation’s government has been shut out by major lenders, who include the International Monetary Fund, World Bank and the Africa Development Bank Paris Club, for defaults and policy mishaps. Mangudya said offshore loan facilities with a value of US$1,3 billion were approved by exchange control in 2020, representing an increase of 32 percent from the US$1 billion reported in 2019.
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