LOCAL financial firm Lloyd Corporate Capital (Private) Limited intends to float a bond with a three-year tenure to finance infrastructure projects for local authorities.
BY MTHANDAZO NYONI
The company’s managing director Bekithemba Nkomo told delegates attending the Local Government Investment Conference held in Bulawayo last week that the bond would be financed by the diaspora as well as local corporates and financial institutions.
“We are proposing to split this bond into local people and local people being local corporates, local financial institutions, local residents and also to split with diaspora,” he said.
“Diaspora is a market that is looking to support the development of Zimbabwe at the moment and we are here to provide you as councils with a platform to allow your ratepayers, to allow your supporters in the diaspora to be able to be part of that payment structure,” Nkomo said.
Nkomo said bond funders would choose which local authority to fund.
Zimbabwe does not have a meaningful budget to finance infrastructure projects as it spends about 80% of its budget on recurrent expenditure.
The World Bank has estimated the country requires at least US$18 billion to revive and develop new infrastructure, but its capacity to access long term capital is being hampered by inability to borrow from international financiers due to huge debt overhang.
Nkomo said the bond could also be used to refinance debts.
“If as a council you have a debt that you have picked up, a debt that is expensive for you, you can refinance it by the proceeds of the bond. The tenure is likely to be around three years but subject to the council and projects that are being discussed, it can be extended but we do not see it being shorter than three years,” he said.
Nkomo said the coupon rate would range between 9% and 12% and could be lower if the council is well rated.
The raising fee would be 2,15%.
“These are still yet to be finalised and will vary from council to council depending on your status as a council and also depending on the type of security that each council would be able to provide,” he said.
“The repayments, now that you have got this money you will have to make a plan to pay back, we are looking at a grace period of 12 months for a capital…The interest payments would start in month seven. So in the first months there is no interest that you will be paying..,” he said.
Capital repayment would start after one year.
“We believe that the diaspora people will put in their pounds, rand or whatever and we would like to give them an opportunity to be able to get those repayments back in currencies each they would have been invested in those bonds,” he said.
Nkomo said to qualify for the bond, local authorities needed to have audited financial statements and a credit rating by an approved agency.
“This bond is purely for infrastructure, you cannot borrow to pay wages or salaries… It’s purely for infrastructure projects and it can only be used for that…,” he said.