Framework model for financing sustainable water and sanitation infrastructure in Zimbabwe

The specific objectives of this study were three-fold: to analyse global public-private partnerships (PPP) models commonly used in providing water and sanitation services in urban settlements, and assess their applicability to the Zimbabwean context; to identify and confirm determinant factors to financing of water and sanitation PPPs in Zimbabwe; and to develop a framework for financing of water and sanitation PPPs in Zimbabwe. It was observed that diverse PPP models such as build-operate-transfer (BOT), build-operate-own (BOO), build-operate-own-transfer (BOOT), and rehabilitate-operate-transfer (ROT) concession contracts as well as management and lease contracts have been used in countries such as Nigeria, South Africa, Senegal and Namibia. Of these models, the most frequently used PPP models are the management and lease contracts especially when the physical infrastructure asset exist. Countries such as South Africa have adopted a situational approach to aligning water infrastructure projects with suitable PPP models. Using principal components analysis (PCA), the study developed a governance index (GIX) and a financial market development index (FDX). Through literature survey, determinants of water and sanitation PPP financing were identified. A blend of Poisson and Tobit regression techniques were used to empirically confirm determinants that influence water and sanitation PPP financing in Zimbabwe. In the main, financing of water and sanitation PPPs in Zimbabwe is influenced by GDP per capita, FDI, Stock market capitalisation to GDP ratio, Domestic bank credit to GDP, the ratio of bank credit to bank deposits, Non-performing loans as well as the governance variables of the control of corruption, voice and accountability and the rule of law. The PCA-developed financial development index insignificantly influence water and sanitation PPP financing. Contrastingly, the institutional governance index is confirmed to have significant influence on water and sanitation PPPs in Zimbabwe. Over and above presenting a framework to unlock financing of water and sanitation infrastructure projects in Zimbabwe, the study recommended, in view of the findings, that through the Securities Exchange Commission (SEC), structural reforms must be implemented to enhance the capacity of domestic capital markets to assimilate large public share issuance. Reforms that entail revising the stock market listing requirements to accommodate infrastructure project companies that have short operating history to facilitate their access to short and long-term financing are critical for water infrastructure development in Zimbabwe. Financial governing authorities are further advised to work on developing liquid domestic government bond market with a long-term yield curve. A long-term yield curve provides a benchmark for risk pricing in infrastructure projects. The government can work with multilateral institutions such as the AfDB in order to generate a positive signalling effect to investors that they can issue bonds on the ZSE. Furthermore, in order to diversify the portfolio of PPP sponsors, the government of Zimbabwe is advised to enforce the current legal frame works in order to improve the country’s ranking with respect to institutional quality. Relative to Chinese sponsors, European and American investors are sensitive to institutional quality prior to committing investment funds. With regard to further research, the study recognises that the scope of partnerships for water infrastructure development has metamorphosed to include other structures such as multi-stake holder partnerships (MSPs) and water operator partnerships (WOPs).