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formation figures, which he said were looking “pretty good”.
Gross fixed capital formation (GFCF) is a macro-economic concept used in official national accounts to statistically measure the value of acquisition of new or existing fixed assets by the Government and the private sector.
It is a component of the expenditure on Gross Domestic Product, showing how much in new value addition in the economy is invested rather than consumed.
“Zimbabwe’s fixed capital formation has significantly increased from around 15 percent in 2009 to about 22 percent today, which fares very well with that of South Africa,” he said.
An ideal situation is that fixed capital formation should be around 30 percent.
Mr Tadesse noted that the public sector had boosted its contribution to the fixed capital formation since 2009, while that of the private sector had declined during the same period.
“Fixed capital formation in the country has largely been driven by the public sector, as we are seeing a lot of investment coming through from the public sector.
“The private sector’s contribution to fixed capital formation has, however, been flat for the past three years, and is expected to decline for the current period,” he said.
But indications appear to be positive in respect of the private sector’s contribution to fixed capital formation in the upcoming year, as investment group Old Mutual has said it plans to invest US$100 million in infrastructure next year.
The PTA boss said it was “absolutely necessary” for the private sector to chip in with fixed capital formation since it has been observed that the public sector can only
contribute half to GFCF, and boosting the private sector required the country to be able to attract capital.
“Capital flows in search of performance,” said Mr Tadesse. It is easy for the PTA to lend to Zimbabwe because the country is a strong founding member and we are a multilateral institution. We are the easy ones to get.”
The PTA Bank has so far lent Zimbabwe around US$600 million over the past five years.
But a study last year by the African Development Bank showed that Zimbabwe required US$14 billion to spruce up its infrastructure.
Raising such funds has been a challenge for Zimbabwe due to its suspension from the International Monetary Fund and the World Bank. The country’s poor credit rating has also meant that it has largely failed at attract capital from foreign institutional investors.
As a result of the clogged external sources of financing, Zimbabwe has had to adhere strictly to a cash budgeting system, which Mr Tadesse applauded.
Fiscal challenges remain as the Government’s wage bill is still unsustainably high against low revenue collection levels.
Online Reporter