Infrastructure and construction investment opportunities n zambia

1. Infrastructure and construction investment opportunities n zambia Presentation by Dr. Sylvester Mashamba Executive Director at the National Council for Construction (NCC)

2. ZAMBIA THE REAL AFRICA

3. Zambia • Location: Sub-Saharan Africa – Southern Central Region, landlocked and surrounded by 8 countries • Area: 752, 000 sq. Km/250,000 sq. Miles • Population: 12.896, 830 million (2009 estimates) • GDP per capita: US$ 969 • GDP growth %y-o-y: 4.8% • Source: IMF/Zambia Central Statistical Office

4. State of Zambia’s infrastructure • Type of infrastructure ranking out of 134 countries • Quality of overall infrastructure 118 • Quality of roads 107 • Quality of railroad infrastructure 92 • Quality of port infrastructure 71 • Quality of air transport infrastructure 99 • Quality of electricity 112 • Main telephone lines (per 100 population) 122 • Source: World Economic Forum 2009

5. Comparison of Zambia’s infrastructure with some other neighbouring countries • Type of infrastructure Zambia Botswana Tanzania • Quality of overall infrastructure 118 43 112 • Quality of roads 107 44 109 • Quality of railroad infrastructure 92 36 79 • Quality of port infrastructure 71 60 113 • Quality of air transport infrastructure 99 97 111 • Quality of electricity 112 73 122 • Main telephone lines (per 100 population) 122 129 129 • Source: World Economic Forum 2009

6. Profile of the Zambian Construction industry The Zambian construction industry can be sub-divided into two main sectors and into another three minor sectors • Consultancy • Contracting And further into • Building • Civil Engineering • Roads (sometimes falls under Civil Engineering) • Materials manufacturers • Materials suppliers

7. Main players • Architects-Zambia Institute of Architects (Act: 442-1995) • Engineers- Engineering Institution of Zambia (Act-1992) • Surveyors-Surveyors Institution of Zambia (Act-1995) • Contractors- National Council for Construction (Act No.13 of 2003) • Government-Road Development Agency, DISS, NRFA, Local Authorities, etc

8. Vital statistics • Biggest growth industry in the country in the last 10 years • Average annual growth rates in the last seven year but one: 17. 5% • Annual Growth rate in 2004 was 20.5% and in 2005 it was 19.9%, but dropped to 9.9% in 2008. • However, employment figures currently at about 13, 000 to 15, 000. Once reached 75, 000 in 1975 when Zambia’s population was less than half than it is now.

9. Resultant construction growth figures • Zambian’s infrastructure and its concomitant construction industry have recorded the highest growth rates in the Zambian economy and is poised to continue on that positive trend. • Source: Bank of Zambia annual reports

10. Water and saniatation • Zambia endowed with abundant water resources but many go without clean water for lack of appropriate water infrastructure. • 89.9% water and 73 % Sanitation access in urban areas • 378% Water and 68% sanitation access in rural areas • Water borne diseases very common especially in the rainy season • The Lusaka the Capital City is not spared from the poor water and sanitation infrastructure. The existing water and sanitation infrastructure for the City of Lusaka and many other cities and towns in Zambia was as best built in the late 1960’s and has had little or no regular maintenance and improvements since. Unless, urgent and appropriate steps are taken now or in the near future, it is only a question of time before Lusaka’s water and sanitation infrastructure completely breaks down. • In the agriculture sector, the country‘s poor water infrastructure also means that the country is entirely reliant on rain water and very little on irrigation, resulting in low agriculture yields. Improved dam construction and irrigation could, therefore, go a long way in reducing food costs and improving food security, especially in rural communities.

11. Energy infrastructure (Hydro- electricity and petroleum) • Electricity production and connectivity is very low in Zambia such that most Zambians, including those in urban areas are heavily dependent on unsustainable and expensive forms of energy: fire wood, resulting in further deforestation. The country through ZESCO currently has capacity to produce up to 1818 MW of electricity and a further 1230 MW is planned for the near future. Failure by the Zambian Government and ZESCO to adequately plan and invest in the country’s electricity infrastructure has meant that the country is experiencing load shedding at peak periods to the detriment of business and other national economic development activities. • The unreliable power supply in the country has meant that some companies and industries have resorted to using generators, thus making these companies and industries uncompetitive, because generator energy consumer as much as three times the cost of hydropower Electricity. Incidentally, the price that customers pay in Zambia for electricity is lower than the cost of producing the same electricity, resulting in a situation where the supplier: ZESCO has no resources to expand or improve of the quality of electricity supplied. • Unfortunately, petroleum energy supply in the country has equally been erratic in the last two months, owing largely to the constant breakdown of the only petroleum refinery in the country: INDENI. INDENI refinery is another national asset that was built in the last 1960’s and has not had any major uplift by way of constant maintenance and investment worth talking about, with the result that the country is now facing constant fuel shortages.

12. Approved and Planned Energy Projects

13. Road transport infrastructure • Zambia being a landlocked country is entirely dependent on road transport, which unfortunately is quite very expensive. The high cost of road transport in Zambia is attributed to delays at the boarders, bad roads and expensive fuels. Zambian roads suffered neglect in the starting from the 1980s to the 1990s. It is estimated that the above neglect resulted into the country’s road stock to loss valve from US$2.3bn to about US$1.5bn in the early 1990’s. • Further of the country’s road stock, only about 40-50% was in good usable condition. Although the state of roads in Zambia is still very bad, it must be acknowledged that the Zambian Government and cooperating partners have invested a lot of money since the mid 1990s and the state of roads has since improved. Zambia has a total of 37,000km of gazetted roads and a further 30,671km of ungazetted roads classified under feeder, national parks and estate roads (RoadSIP Bankable Document, August 2001, p.1-1). The Government with the support of cooperating partners have set up a Road Sector investment Programme over a period of 10 year at the cost of US$1.6bn. The introduction of fuel levy for use in road maintenance has also greatly helped to keep our roads in a fairly usable state. • When looking a the issue of transportation costs, it is important to note that studies in Africa have shown that a 10% drop in transport costs could result in an increase in trade of 25% (World Bank 2000, p.138).

14. Rail transport infrastructure • Zambia has basically two independent rail lines, one which runs from Chililabombwe in the North to Livingstone in the South. The other line is the TAZARA line, built and managed in partnership with the Chinese and Tanzanians, which connects with the first line above at Kapiri-Mposhi in Zambia and runs right through to Dar-es-Salaam in Tanzania. TAZARA is reported to have a 2.5 million tonnes design capacity, although only 15% of that capacity is currently be used for lack of locomotive power and wagon availability. Unfortunately, both lines suffered severe deterioration largely due to poor maintenance and lack of appropriate upgrade. • Consequently, rail freight costs in Zambia are relatively more expensive than elsewhere in the regional or internationally. For example, a study by the World Bank (The Challenge of Competitiveness and Diversification, 2003, p.13) has shown that rail freight costs between Durban and Lusaka were more than double at US$3018 per 20 ft container weighing 14 tons, whereas the same container cost only US$1261 from Durban to Harare. The same report also rated Zambian’s inland facilities among the worst in Southern Africa.

15. Air transport infrastructure • Zambia has a total of four international airports: at Lusaka, Livingstone, Ndola and Mfuwe. Currently, all the four aforementioned international airports, including Lusaka are underutilised. The absence of a national airline, the global economic crisis high jet fuels in Zambia have greatly contributed to the under-utilisation of the Zambian airport infrastructure. • The above notwithstanding, it must be stated, that the Lusaka International airport is capable of handling the latest Boeing 747 and other modern aircrafts. Zambia’s geographical position and the Lusaka International Airport facilities in particular equally position Zambia to become a major international air hub.

16. Telecommunications infrastructure • Although Zambia’s telecommunications sector is still in need of massive investment to bring it in line with modern trends and capacities, it was liberalised a long time ago. Land lines service is still very small in numbers and in most cases the service is very poor. The mobile phone sector is on the other hand very well subscribed with a total of four service providers. Internet services are still very unreliable and very slow, although it must be noted that both ZESCO and ZAMTEL are now in the process of commissioning a fibre network which it is hoped will greatly improve internet connectivity and speed. It must also be noted that the lack of coordination in the sector also adds to the cost of telecommunications. For example, coordination between ZESCO and ZAMTEL, both of which are state enterprises could have greatly reduced the total cost of the national fibre project. • Continued poor telecommunication infrastructure in the country continues to impede market information and thus continue to impede the integration of domestic, regional and international markets. The current state of our communication infrastructure could explain why it is common in this country to hear of cases of citizens in one part of the country to have food going to waste for lack of market, whilst in another part of the country; citizens go without food for lack of lack of adequate food supplies.

17. Priority areas in infrastructure investment in Zambia (Fifth National Development Plan-FNDP and Vision 2030) • Roads: Road Sector Investment Plan (RoadSIP) with a total investment of US$ 1.6bn over a ten year period [2004- 2013] • Energy: Rehabilitate and upgrade existing Hydro power stations and build new ones, build new Thermal power station in Maamba-Southern Province , Rural electrification • Sports Infrastructure: Rehabilitate Independence Stadium and build new stadia in Ndola. • Health: New cancer Research Centre in Lusaka, Lusaka and District hospitals, rural and per-urban clinics, Nursing schools

18. Priority areas in infrastructure investment in Zambia (Fifth National Development Plan-FNDP) • Housing: Both for public sector workers and for the private sector • Other Public Sector Infrastructure: Boarder posts, Government buildings such as those for Government Ministries, Parastatals, organizations/institutions, the Police and the Defense Forces • Water and Sewage disposal infrastructure: Rehabilitate and build new water dams, water reticulations systems including its associated sewage disposal systems in both urban and rural areas • Education: Build new public Universities and upgrade existing colleges to universities, Build and rehabilitate existing colleges, schools and staff housing

19. Ongoing and recently completed infrastructure Projects • Roads and bridges: Mwanawasa Bridge, Kafulafuta -Ndola bypass, Katima Mulilo bridge, • Commercial Buildings (Private Sector)– Barclays Bank Headquarters, • Students Hostel Accommodation: at the University of Zambia, Evenly Hone College, National Institute of Public Administration (NIPA), Copperbelt University (CBU) • Rehabilitation of Existing Hydro power stations – Itezhi Tezhi, Kafue Gorge, Livingstone

20. Zambia’s Infrastructure related investment opportunities • Roads: Kitwe-Chingola Dual Carriageway (52Km) & the Chingola-Solwezi Road (173Km). • Railways: Construction of the Chingola-Solwezi Railway link, rehabilitation of the TAZARA rail line currently jointly owed by Tanzania and Zambia, (may be commercialized or privatized) • Border posts through -PPP: Government is thinking of building new boarder post at Nakonde, Kasumbalesa and other border posts through PPPs initiatives. • Kazungula Bridge and Boarder posts: linking Zambia, Zimbabwe and Botswana, Feasibility study has been funded by the African Development Bank • Upgrading Lusaka and Livingstone International airports: Airports are earmarked for improvements in readiness for the 2010 FIFA world Cup Games

21. Zambia’s Infrastructure related investment opportunities (cont.) • Olympic sized swimming pool: Planned in line with the then hosting of the 2011 All Africa games scheduled to have been held in Lusaka • Multi-facility Economic Zones in Lusaka and Chambeshi: Multi-Facility Economic Zones are planned, the Chinese have already started building the other one in Chambeshi (Copperbelt Province) and investors are sought for the one planned for Lusaka South. • Olympic sized running truck and indoor sports arena: Both these sports facilities were initially planned for the 2011 All Africa Games with a view to handing them over to the private sector/relevant sports bodies after the games. • Water, Solid waste and sewerage disposals:

22. Constraints faced by most Zambian construction companies • Access to capital • Late payments • Attitude of local commercial Banks and high interest rates • Credit/start up capital • Cost of capital • Currency fluctuations

23. Priority areas in infrastructure investment in Zambia (Fifth National Development Plan-FNDP and Vision 2030) • Roads: Road Sector Investment Plan (RoadSIP) with a total investment of US$ 1.6bn over a ten year period [2004- 2013] • Energy: Rehabilitate and upgrade existing Hydro power stations and build new ones, build new Thermal power station in Maamba-Southern Province , Rural electrification • Sports Infrastructure: Rehabilitate Independence Stadium and build new stadia in Ndola. • Health: New cancer Research Centre in Lusaka, Lusaka and District hospitals, rural and per-urban clinics, Nursing schools

24. Priority areas in infrastructure investment in Zambia (Fifth National Development Plan-FNDP) • Housing: Both for public sector workers and for the private sector • Other Public Sector Infrastructure: Boarder posts, Government buildings such as those for Government Ministries, Parastatals, organizations/institutions, the Police and the Defense Forces • Water and Sewage disposal infrastructure: Rehabilitate and build new water dams, water reticulations systems including its associated sewage disposal systems in both urban and rural areas • Education: Build new public Universities and upgrade existing colleges to universities, Build and rehabilitate existing colleges, schools and staff housing