Government has granted prescribed asset status to Afreximbank’s Depository Receipts worth $300 million.
The depositary receipts (DR), which will be listed on the Stock Exchange of Mauritius and is being managed by SBM Asset Mangers as lead arranger, opens Afreximbank’s shareholding to the investing public, including Zimbabwean investors, and marks the first time a supranational bank is issuing depositary receipts through an African stock exchange.
In a letter to the Zimbabwe Association of Pension Funds (ZAPF) seen by Business Weekly, the Insurance and Pensions Commission (IPEC) said Afreximbank’s Depository Receipts had been granted prescribed asset status.
This comes after local pension funds had expressed interest in prescribing for the DRs leading to Afreximbank applying for prescribed asset status from Government, a request which has now been granted. Zimbabwean companies are not allowed to invest offshore unless they have been granted permission by the Government.
The DRs are expected to provide local investors with an alternative option to diversify their portfolios. Locally, investment options have been very limited with very few asset classes being available in terms of where to put money.
Zimbabwean pension funds are required by law to invest at least 10 percent of their portfolio in prescribed assets, while life and funeral assurance companies are required to invest 7,5 percent of market value of the total adjusted assets in prescribed assets. Short-term insurance companies are required to invest five percent of their funds in prescribed assets.
Afreximbank is the issuer of the DRs while Mauritius based SBM Securities Limited is the depository.
The offer will be made up of fully paid up Class “D’ shares in the form of 69 770 000 Depository Receipts. The issue price for the Class “D” Share is $43 000 while the issue price per Depository Receipts is $4,30.
The DRs will also be listed on the Stock Exchange of Mauritius and has a target dividend yield of five percent. Dividends will be payable to investors based on paid-in capital or the invested amount.
On top of the $300 million, Afreximbank targets to mobilise up to $1 billion in equity from new and existing investors over the next five years.
A DR is a type of negotiable (transferable) financial security traded on a stock exchange but represents a security, usually in the form of equity, issued by a foreign, publicly-listed company. The DR, which is a physical certificate, allows investors to hold shares in equity of other countries.
DRs lead to increased access to capital, and are a means of increasing global visibility and trade. They also allow increased liquidity and global benchmark valuation.
In August this year, Dr Benedict Oramah, President of Afreximbank, told the investors that the issuance of the depositary receipts was to enhance the Bank’s capitalisation so as to significantly narrow the trade financing gap in Africa, which is currently estimated at $120 billion annually, and to meet the strategic objective of growing intra-African trade.
The issuance also represents an opportunity for Afreximbank to diversify its shareholder base by enabling investors in Africa and beyond, who have not yet invested in the Bank to do so, added the President.
Afreximbank’s shareholders are a four-tier mix of public and private entities, with Class “A”, constituted of African states, African central banks and African public institutions; Class “B”, made up of African financial institutions and African private investors; Class “C”, with shares held by non-African investors, mostly international banks and export credit agencies; and Class “D”, under which fully paid shares can be held by any investor.
Afreximbank has total assets amounting to $11,7 billion and shareholders’ equity of $1,6 billion as at December 31, 2017.
Afreximbank is one of the few financial institutions that have been supporting developmental and economic programs in Zimbabwe, with the latest one being the $1,5 billion package that was promised to the country this week.
On Tuesday, the African Export-Import Bank (Afreximbank) announced a $1,5 billion economic stabilisation package for Zimbabwe that will go towards the revival of the productive sectors of the economy. Speaking about the package, Afreximbank president and board of directors chairman Dr Okey Oramah said the funds being provided by Afreximbank would also be used to provide investment guarantees for investors, to entice them to come to Zimbabwe.
Apart from the $1,5 billion, the regional bank had earlier availed a $600 million nostro stabilisation facility to enable the country to meet its foreign currency requirements for productive foreign payments.