Farai Mabeza, Senior Staff Writer 
THE government says there is an appetite for foreign currency-denominated infrastructure bonds on the market, as the authorities hunt for affordable long-term finance to boost ongoing infrastructure development programmes.
Non-accounting permanent secretary in the ministry of Finance, Judith Kateera, acknowledged the challenges faced by the government in its bid to raise infrastructure funds.
“We have been talking about financing infrastructure and we want to access long-term financing, which is normally concessional, meaning interest rates are low, but one of the biggest challenges that we are facing right now is that inflation is still very high.
“So, investors would demand very high interest rates, that are higher than the inflation, if they were to participate in Zimbabwe dollar bonds,” Kateera told The Financial Gazette this week.
“But should the government consider issuing bonds in US dollar terms… and we have already done some market canvassing, there is a huge appetite for such a bond because it offers stability and access to funding at low interest rates.
“If you look at the size of our financial markets, the balance sheets are not strong enough. For example, I cannot enter the market and raise US$2 billion but if we open up and invite people from the diaspora or anyone from the continent to participate in that bond issue, we should be able to raise the funds.”
Kateera believes that a guarantee from the African Development Bank (AfDB) would make such a bond even more appealing to investors. “More importantly, if we raise the money on the back of a multilateral development bank like the African Development Bank … if they agree to give us a guarantee, the AfDB is a triple A-rated institution.
From the market canvassing we have done, there is a huge appetite to support our long-term infrastructure financing,” she said.
The government has undertaken a number of huge infrastructure projects including in the transport and agriculture sectors. These, however, have been funded directly by the Treasury, a situation the government says is not ideal.
“Most of our funding is coming from tax revenue. Unfortunately, the people who are in the formal sector and contributing tax are about 20 percent. The majority are in the informal sector.
“So, we are also looking at how we can expand the tax base by making sure that everyone is included because when we are talking about infrastructure we are talking about publicly owned property. So, everybody needs to contribute,” Kateera said.
“We also need to conscientise the public on the benefits of contributing, for instance, to a bond issue like an infrastructure bond. When we raise that money, it should be at reasonable interest rates.” Treasury chief Mthuli Ncube has also talked about the government’s intention to issue foreign currency-denominated bonds on the Victoria Falls Stock Exchange (VFEX).
“The issuances include the impending US dollar-denominated bond of US$100 million to be issued through the VFEX for infrastructure development (roads rehabilitation, health, and irrigation infrastructure),” Ncube said last year.
Minister of Transport, Felix Mhona, has also said Zimbabwe needs to be innovative to raise funds for national infrastructure projects to make up for the lack of concessionary funding. The country is struggling to attract such funding due to the high national debt, while the United States of America’s Zimbabwe Democracy and Economic Recovery Act bars multilateral financial institutions from lending to Zimbabwe.
“We need PPPs, which can be in the form of BOTs (build operate and transfer). Come, let us reason together so that you tap into these opportunities. Look at the air (transport sector) we still have opportunities.
