The City of Harare is seeking the nod from ratepayers and voters to raise $100 million for the upgrade of the municipality’s collapsing infrastructure.
BY BUSINESS REPORTER
The city said it wants to issue municipal bonds which will also finance the purchasing of water meters and construction of home industries in Kuwadzana and Mufakose.
In a notice last week, the city said it wanted to borrow a sum not exceeding $100m by way of municipal bonds which are debt securities issued by states, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects such as building schools, highways or sewer systems.
It said the upgrade of Geneva, Joburg Lines, Tafara and Zororo houses would chew $30m, construction of Lyndurst Sewer Treatment works ($25m), replacement of water pipes ($15m), upgrade of sewer lines ($10m) and $5m for city centre maternity clinic.
The city has earmarked $5 million apiece for the upgrade of Hopley, Kuwadzana, Budiriro and Hatcliffe polyclinics and purchase 65 000 water meters, Gazaland home industry ($600 000), construction of Hatcliffe Farmers Market ($700 000), construction of Kuwadzana Home Industry ($900 000), $800 000 for the construction of Mufakose Home Industry $2m for the construction of Mbudzi Roundabout Flea Market.
The lead financiers are Cabs and they have indicated that give the quantum and market conditions, syndication would be a way yo go, according to Harare mayor Bernard Manyenyeni.
“Indicative coupon is 6% and tenor will depend on projects to be financed. It can be five to 10 years. We wanted long-term, but this will depend on the sweeteners like prescribed asset status or liquid asset status, and securities such at government guarantees,” he said.
Liquid asset status means the bonds are tradable, while prescribed asset status makes it mandatory for pension funds to make certain investments in bonds.
Finance committee approved the borrowings.
The intention to raise $100m comes at a time the city has been complaining that revenue generated (about $12m monthly) was consumed by salary expenditure meaning little resources are left for other capital expenditure projects. The situation is the same at all the local authorities.
According to a World Bank report on Zimbabwe, expenditure growth among local authorities has outpaced revenue growth, and small intergovernmental transfers have exacerbated fiscal imbalances at local level.
“Central government debt to local authorities reached $36m in March 2016. Moreover, the central government’s control over changes in fees and tariff rates constrains the ability of local authorities to respond to fiscal shortfalls,” the bank said in a report, Zimbabwe Economic Update.
Local authorities are still reeling from a debt write-off imposed by government in the run up to the 2013 elections.
According to the World Bank, the debt write-off was “followed by a rapid increase in payment arrears for local services, as residents appear to be delaying payment in the hope of another write-off”.