The Zimbabwe Stock Exchange (ZSE) is mulling floating its first ever municipal bond that should help raise funds for basic infrastructure projects for a local municipality.
This comes amid concerns the local authorities in general have to come out clean on corporate governance matters, a situation that has seen private investors frowning at their projects.
The local bourse is also expected to introduce the exchange traded fund (ETF) by end of this quarter as part of efforts to widen products on the market.
ZSE chief executive officer Justin Bgoni told Business Weekly that the bourse was already in discussions with one of the country’s top municipalities for issuance of the bond, taking a cue from other countries like South Africa and Nigeria where municipal bonds have been a success.
He, however, declined to disclose the name of the municipality.
If successful, this will help reduce infrastructure deficits such as the housing backlog and water reticulation infrastructure.
According to the African Development Bank, Zimbabwe has an infrastructure backlog that requires an estimated USD$14 billion, for housing, road and rail rehabilitation, utilities infrastructure as well as other social amenities.
Bgoni said the infrastructure deficits in the country provided scope for municipalities to approach the market for raising funds for projects.
“I really think if municipalities raise money through the market it would solve a lot of issues such as the housing backlog,” he said in an interview on the sidelines of the ZSE IPO Masterclass on Tuesday.
“About 25 percent to 35 percent of their (municipalities) money should come from the market and imagine the amount of problems they could solve with that.
“Pension funds want to invest and they are thinking about long term investments, and water infrastructure is long term which makes sense,” he said.
Municipal bonds are issued by state and local governments or municipalities to raise money for public works projects like the construction and maintenance of bridges, hospitals, schools and water treatment facilities.
A bond issuer (the municipality) sells the bond to the bond holder (the investor).
He, however, indicated while this was new in Zimbabwe, local municipalities needed to uphold corporate governance before coming to the market.
Bgoni acknowledged the country’s capital markets was still lagging behind in terms of products while local minority investors were still shying away from the bourse.
Last year, the bourse launched the C-Trade platform that has brought convenience and efficiency to equities trading by allowing investors to trade using their mobile devices.
Despite the convenience, local retail investors still require information on the stock market to demystify it as it is still regarded elitist.
Bgoni said the ZSE had line up workshops and roadshows for basic information dissemination as well as attract local retail investors.
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