Harare City Council says it will soon engage Treasury on the status of its ambitious $100 million municipal bonds for infrastructure development.
BY PAIDAMOYO MUZULU
Mayor Bernard Manyenyeni told NewsDay yesterday that they were planning to engage the Finance and Economic Development ministry before the bonds could be floated on the market.
“We have already advertised that we need to borrow $100 million and invited objections from stakeholders. Council will meet to consider the objections while we will then apply for borrowing powers to the minister (Local Government) and Ministry of Finance,” Manyenyeni said.
This is the first time the city has decided to go on the open market to sell municipal bonds. The $100 million is earmarked for road maintenance, refurbishing of the water and sewer reticulation system, renovation of council houses, building new polyclinics and informal sector factory sheds.
The council has since engaged CABS to be the lead financiers and advisers in the raising of the bonds, proposed tenure, coupon rate and status of the instrument.
“Indicative coupon rate is 6% per annum and tenor will depend on the projects to be financed, but we were looking at between five and 10 years. We wanted long term, but this will depend on the sweeteners like if the bonds will be given prescribed asset status or liquid asset status and securities such as government guarantees,” Manyenyeni said.
Prescribed asset status means insurance and pension houses will be obligated to invest; and liquid asset status means the bonds can be freely traded on the markets, thus making them attractive to investors who do not want to hold them to maturity.
It’s not yet clear whether the bonds will be floated locally or internationally.
Manyenyeni said the floating of the bonds would be a culmination of the city’s hard work to have up-to-date audited financial statements.
“We are now about to reap the benefits of the city having up-to-date audited statements. In the past we could not raise money from the market through floating bonds as we did not know our real financial position,” the mayor said.
This is the first time in nearly 15 years that the council has provided up-to-date financial statements.
A municipal bond is defined as a debt security issued by a State, municipality or county to finance its capital expenditures, including the construction of highways, bridges or schools.