Ishemunyoro Chingwere Business Writer
Agriculture and commercial land could be used as security for the US$3,5 billion sovereign bond the Government plans to issue to raise funds meant to compensate former white commercial farmers who lost land under the land reform programme.
Last month Government signed the Global Compensation Deed Agreement at a ceremony presided over by President Mnangagwa that will benefit about 4 000 white commercial farmers for improvements, biological assets, and land clearing costs on the farms they used to occupy.
The decision to use the land as part of the capital raise strategy comes at a time when Government plans to issue a 30-year sovereign bond.
A sovereign bond or Government bond is one that is issued by a national Government, with a promise to pay periodic interest payments called coupon payments and to repay the face value on the maturity date.
In an interview with Zimpapers Television Network (ZTN) Finance and Economic Development Minister Professor Mthuli Ncube said land will come in handy in the quest to raise capital.
“We are looking at other structures, that may be linked to land itself not necessarily farming land it could be commercial land that Government owns.
“We are looking at all those strategies, especially land that is around urban areas,” said Minister Ncube.
“We are also looking at other Government assets which could be offloaded to support the liability attainment,” he said.
Land and other assets will, however, only be used if the Government fails to find guarantors for the bond from other governments and partners.
“Once we have external guarantee we may not necessarily then need to have some securitisation of other available assets, but if there is no guarantee then we will have to securitise some assets,” said Minister Ncube.
He said Government “will use every means just to make sure we can raise the money”.
Finding guarantors or using land as security will help the bond be attractive both in terms of the level of the yield and also in terms of its credit quality.
“We are looking at issuing a 30-year bond or debt instrument. We will try to talk to a few institutions or indeed Governments and partners to see if they could guarantee this debt instrument so that we can enhance its credit standing in the market,” said Minister Ncube.
“We are going to hire financial institutions to also help us place this bond in the market in the usual way in the capital markets.”
A Resource Mobilisation Committee chaired by Minister Ncube and includes members of the former farmers have since been put in place.
The Minister said the target market is international although there is room for a portion being placed on the Victoria Falls Securities Exchange (VFEX) for the benefit of local investors with free funds or other resources.
The payment of former white commercial farmers is set to bring closure and finality to the land reform programme which has widened citizen participation in agriculture, itself the anchor sector of Zimbabwe’s economy.