Business / Local
Bulawayo lobbies for bond market headquarters
16 Nov 2015 at 16:23hrs | Views
AS efforts to revive the bond market in Zimbabwe gather moment, Bulawayo businesses are lobbying that the debt market be headquartered in the second largest city.
A bond market is a regulated financial system that allows the public and private sectors to raise money through issuance of debt instruments.
With about $400 million of foreign direct investment (FDI) coming through last year, Zimbabwe is desperately looking for capital to fund its local infrastructural projects and provide new capital to its ailing manufacturing companies.
The bond market, thus, provides investors seeking to diversify their portfolios and minimise risk, particularly from the volatile stock market, more options.
According to the International Monetary Fund (IMF), bond financing is growing compared to other forms of financing in emerging economies.
The establishment of the bond market in the "City of Kings", captains of industry say, would breathe new life into the ailing manufacturing sector and facilitate robust, long-term development in the southern region and the country at large.Two weeks ago Zimbabwe Stock Exchange (ZSE) chief executive officer Alban Chirume hinted on the submission of an amended bond market listing guidelines to the Securities and Exchange Commission of Zimbabwe (SECZ) for approval, paving way for re-launch of the debt market, which collapsed at the turn of the millennium. While commending the move, the business community in Bulawayo say a deliberate policy position is needed in establishing the bond market in Bulawayo.
"ZSE should set up the bond market in Bulawayo. At the moment our economy is too centralised as everything is headquartered in Harare. Why can't we have the bond market here?" Siqokoqela Mphoko, Choppies Zimbabwe Director, said.
While the government has been talking about developing the economy and reviving industries in Bulawayo, Mphoko feels setting up a bond market in the city should be part of the solution.
"We can't have all banks, insurance, companies and other critical services headquartered in Harare with nothing for other cities like Bulawayo and then talk of reviving the industry here," he said. It is the local bourse's mandate to provide a regulated platform for the mobilisation of long-term capital and the trading of securities.
This is critical especially in Zimbabwe where long term financing is a major hurdle given the tight liquidity environment on the market.
ZSE has also proposed a bond pricing framework, which is under discussion with the regulator.
Chirume has been quoted as saying: "… the environment is ripe for the re-launch of the debt market as appetite from issuers and investors is high".
Prominent businessman Obert Sibanda says Zimbabwe should take a leaf from neighbouring South Africa whose cities are designated according to different administrative purposes.
In South Africa Pretoria is the government or executive capital, Johannesburg is the commercial or business hub while Cape Town is the legislative capital.
"Having a bond market in Bulawayo would be a very noble idea as it will aid industry revival in the context of decentralisation," said Sibanda.
"Not only the bond market but as businesses in Bulawayo we've been lobbying for a secondary bourse because there's a lot of centralisation. Infact, the history of ZSE began here in Bulawayo.
"Generally, we want a situation where different places in the country have different functions. Some people take it politically but it's not. Decentralisation results in a balanced economy and would ease the congestion that's in Harare."
Another businessman, Delma Lupepe, said having the bond market in Bulawayo would not only assist in developing the city but the region as a whole.
"We need a strong political will if we're to have the bond market here. Right now Bulawayo has nothing substantial to show in the form of support for industry," he said.
"There's no reason why Reserve Bank Governor John Mangudya can't issue treasury bills for Bulawayo companies. I also don't think Bulawayo needs $10 million Dimaf loan to revive industry. But the bond market will take us somewhere."
Lupepe applauded Finance Minister Patrick Chinamasa for his re-engagement efforts with the international financial institutions, which he said was crucial in laying a solid foundation for foreign direct investment and viability of the local bond market.
Economic analyst Reginald Shoko also said the bond market has the potential to transform Bulawayo's fortunes in the long term but warned that certain economic fundamentals should be addressed before re-launching the bond market.
"The whole idea of bonds borders around security. It's a game of trust. While it can unlock the liquidity deadlock and assist in production, it needs serious money to finance it and it won't be wise to start it using borrowed money as that will spread liability," said Shoko.
Pockets of successful bond issues have been registered since 2009 when Zimbabwe adopted a multiple currency system.
The Bindura Nickel Corporation's $20 million bond issue this year for the restart of its smelter, CBZ's $20 million bond issue in 2012 meant to finance infrastructure development, IDBZ's $30 million issue (2012) to finance the procurement of prepaid meters and the ZB Bank's $10 million Agri-bills, come into mind.
Recently, IPEC, the body governing the operations of insurance and pensions industry in the country, indicated that players were holding bonds with prescribed asset status worth up to $437,8 million.
When a bond is accorded prescribed asset status, it enables portfolio managers in insurance and pension funds to fulfil their obligations in terms of the law, which requires that a certain percentage of their investments should be in the form of prescribed assets.
IPEC has made recommendations to the Ministry of Finance and Economic Development that all future bonds should bear prescribed asset status in terms of section 26 of the Insurance Act and Section 18 of the Pension and Provident Funds Act.
A bond market is a regulated financial system that allows the public and private sectors to raise money through issuance of debt instruments.
With about $400 million of foreign direct investment (FDI) coming through last year, Zimbabwe is desperately looking for capital to fund its local infrastructural projects and provide new capital to its ailing manufacturing companies.
The bond market, thus, provides investors seeking to diversify their portfolios and minimise risk, particularly from the volatile stock market, more options.
According to the International Monetary Fund (IMF), bond financing is growing compared to other forms of financing in emerging economies.
The establishment of the bond market in the "City of Kings", captains of industry say, would breathe new life into the ailing manufacturing sector and facilitate robust, long-term development in the southern region and the country at large.Two weeks ago Zimbabwe Stock Exchange (ZSE) chief executive officer Alban Chirume hinted on the submission of an amended bond market listing guidelines to the Securities and Exchange Commission of Zimbabwe (SECZ) for approval, paving way for re-launch of the debt market, which collapsed at the turn of the millennium. While commending the move, the business community in Bulawayo say a deliberate policy position is needed in establishing the bond market in Bulawayo.
"ZSE should set up the bond market in Bulawayo. At the moment our economy is too centralised as everything is headquartered in Harare. Why can't we have the bond market here?" Siqokoqela Mphoko, Choppies Zimbabwe Director, said.
While the government has been talking about developing the economy and reviving industries in Bulawayo, Mphoko feels setting up a bond market in the city should be part of the solution.
"We can't have all banks, insurance, companies and other critical services headquartered in Harare with nothing for other cities like Bulawayo and then talk of reviving the industry here," he said. It is the local bourse's mandate to provide a regulated platform for the mobilisation of long-term capital and the trading of securities.
This is critical especially in Zimbabwe where long term financing is a major hurdle given the tight liquidity environment on the market.
ZSE has also proposed a bond pricing framework, which is under discussion with the regulator.
Chirume has been quoted as saying: "… the environment is ripe for the re-launch of the debt market as appetite from issuers and investors is high".
Prominent businessman Obert Sibanda says Zimbabwe should take a leaf from neighbouring South Africa whose cities are designated according to different administrative purposes.
In South Africa Pretoria is the government or executive capital, Johannesburg is the commercial or business hub while Cape Town is the legislative capital.
"Having a bond market in Bulawayo would be a very noble idea as it will aid industry revival in the context of decentralisation," said Sibanda.
"Not only the bond market but as businesses in Bulawayo we've been lobbying for a secondary bourse because there's a lot of centralisation. Infact, the history of ZSE began here in Bulawayo.
"Generally, we want a situation where different places in the country have different functions. Some people take it politically but it's not. Decentralisation results in a balanced economy and would ease the congestion that's in Harare."
Another businessman, Delma Lupepe, said having the bond market in Bulawayo would not only assist in developing the city but the region as a whole.
"We need a strong political will if we're to have the bond market here. Right now Bulawayo has nothing substantial to show in the form of support for industry," he said.
"There's no reason why Reserve Bank Governor John Mangudya can't issue treasury bills for Bulawayo companies. I also don't think Bulawayo needs $10 million Dimaf loan to revive industry. But the bond market will take us somewhere."
Lupepe applauded Finance Minister Patrick Chinamasa for his re-engagement efforts with the international financial institutions, which he said was crucial in laying a solid foundation for foreign direct investment and viability of the local bond market.
Economic analyst Reginald Shoko also said the bond market has the potential to transform Bulawayo's fortunes in the long term but warned that certain economic fundamentals should be addressed before re-launching the bond market.
"The whole idea of bonds borders around security. It's a game of trust. While it can unlock the liquidity deadlock and assist in production, it needs serious money to finance it and it won't be wise to start it using borrowed money as that will spread liability," said Shoko.
Pockets of successful bond issues have been registered since 2009 when Zimbabwe adopted a multiple currency system.
The Bindura Nickel Corporation's $20 million bond issue this year for the restart of its smelter, CBZ's $20 million bond issue in 2012 meant to finance infrastructure development, IDBZ's $30 million issue (2012) to finance the procurement of prepaid meters and the ZB Bank's $10 million Agri-bills, come into mind.
Recently, IPEC, the body governing the operations of insurance and pensions industry in the country, indicated that players were holding bonds with prescribed asset status worth up to $437,8 million.
When a bond is accorded prescribed asset status, it enables portfolio managers in insurance and pension funds to fulfil their obligations in terms of the law, which requires that a certain percentage of their investments should be in the form of prescribed assets.
IPEC has made recommendations to the Ministry of Finance and Economic Development that all future bonds should bear prescribed asset status in terms of section 26 of the Insurance Act and Section 18 of the Pension and Provident Funds Act.
Source - chronicle
