Minister calls for financing of SMART cities, development of rural areas

The conference gave participants an opportunity to compare notes, share experiences, and craft comprehensive solutions towards the financing of SMART Cities and the development of the rural hinterland.

This is happening against the backdrop when traditional funding strategies have proven inadequate to sustain the development of SMART Cities and champion rural development.

In common parlance, SMART Cities denote spaces where people, live, work and play. According to Guides et al. 2010; Cocchia 2014; Lara 2016 say ‘SMART City’ is an umbrella concept that subsumes several subthemes such as intelligent urbanism, innovative economy, sustainable and thoughtful environment, and smart technology, intelligent energy, smart mobility, creative health and so on. The emphasis is on sustainable and inclusive development, and the idea is focused on compact areas with a view to promoting cities that provide core infrastructure and give a decent quality of life to their citizens, a clean and sustainable environment and the application of SMART Solutions.

The core infrastructure elements in a smart city include:

1. Adequate water supply,
2. Assured electricity supply,

• Sanitation, including solid waste management,

1. Efficient urban mobility and public transport,
2. Affordable housing, especially for the poor,
3. Robust IT connectivity and digitalisation,

• Good governance, especially e-governance and citizen participation,
• Sustainable environment,

1. Safety and security of citizens, particularly women, children and the elderly, and
2. Health and education.

2^nd of September 2021 involves the “Proposed development of Melfort Smart City as a Collaborative Initiative between the Government of Zimbabwe and a Consortia of Pensions and Provident Funds, banking institutions and related corporates led by the Zimbabwe Electricity Industry Pension Fund and ZESA Staff Pension Fund”, inclusive of Figtree and Chirundu Smart cities. The Smart cities development is premised on Public-Private Partnerships.

Hon Garwe said it is the Government’s expectation that more players and stakeholders should come on board in order to spread risk and lessen the burden of implementation.

The proposed SMART City development helps to solve developmental challenges affecting the country in terms of housing, and infrastructure development, improving the residents’ social status, including economic opportunities. It will also help to decongest the big cities and address the seventeen Sustainable Development Goals and foster inclusive development that leaves no place and no one behind as espoused in the Zimbabwe National Human Settlements Policy, the National Development Strategy 1 and the Vision 2030.

The minister said the availability of unencumbered, adequate and suitable land, designs and the Special Purpose Vehicle (SPV) is critical for the successful development of Smart Cities as financing models usually are associated with ownership and the registration of the land by an SPV and the phased development approach in order to ensure project bankability.

“It is worthy of note that Melfort, Figtree and Chirundu maintain peri-urban characteristics associated with both urban and rural settings, and the development of SMART Cities will significantly reduce the rural-urban divide in keeping with the Ministry’s Rural Transformation Programme that is anchored on rural waste management, leaves no one and no place behind and is focused on the introduction of flushable toilets at rural schools and clinics.”

Hon Garwe revealed that in the 2022 financial year, Treasury has made available ZWL$284.5 million for the Programme targeted at schools and clinics in the 8 rural provinces and involving the provision of 3 334 flushable toilet units.

The Melfort SMART City development is a pilot project being championed by Zimbabwe Electricity Pension Fund and ZESA Staff Pension Fund who have also approached other potential funders to come on board.

The SMART City development will be implemented through an SPV or Real Estates Investment Trust (REIT). A Real Estate Investment Trust is a regulated investment vehicle that enables the issuer to pool investors’ funds for the purpose of investing in real estate in exchange for units in the trust and share in the profits or income from the real estate assets owned by the trust.

REITs afford all investors private or institutional the opportunity to invest in large-scale, diversified portfolios of income-producing real estate.

In Zimbabwe, REIT is governed by the Collective Investment Schemes Act (24:19); Income Tax Act (23:06) and Securities and Exchange Act (24:25).

Application for registration of REIT is done through the trustee or the Manager pursuant to the Collective Investment Schemes Act. The Trustee or the Manager also executes the Trust Deed.

In the event that the issuer invites the public to subscribe to the issue a prospectus is required but otherwise a pre-listing statement is prepared.

1. BENEFITS OF REITs

The following are benefits of REIT to Investors:

1. It affords the investors indirect exposure to a wide variety of expertly managed portfolios.

2. Income REIT is supported by lease agreements that provide for regular dividends.

3. REIT is exempt from income tax and REIT security holders will only pay the 1% CGWT on disposal of securities and 10% withholding tax on dividend earned.

4. REIT can be traded on the Zimbabwe Stock Exchange.

5. REIT is subject to the Income Tax Act, the CIS Act and the SEC Act.

6. REIT securities price is determined by market forces and is visible to the public.

2. BENEFITS TO ISSUERS
3. Tax exemption is a major attraction to potential investors.

2. They is potential for risk sharing through joining of other investors.

3. Increased liquidity – especially for property holdings of pension funds and other institutions.

4. Possibility of an increase in capital.

3. RISKS ASSOCIATED WITH REITs

The following are risks associated with REIT to Investors:

1. Market risk through capital loses.

2. Low yields

3. Credit risk associated with (mortgage based REIT).

4. Liquidity risk associated with (development REIT).

The following are issuer-associated risks:

1. Market risk valuations.

2. Limited leverage.

3. Land and lease issues related to tenure certainty.

4. Liquidity risk related to the underlying portfolio; and

5. Regulatory risk

5. THE BENEFITS OF SMART CITIES

SMART Cities are associated with the following benefits:

1. They are safer Cities
2. Air quality is (less polluted)
3. Internet of Things and surveillance cameras improves the safety of residents and increases incidence-response-time
4. Improved city utilities efficiency
5. Efficient city lighting systems
6. Improved city traffic flow
7. Increased public transport convenience and efficiency
8. Strain gauge – promotes better citizen collaboration and feedback
9. Improved living standards of the city residents.