BCC considers introduction of Tradable Municipal Bonds

The City of Bulawayo is exploring new ways to finance its critical infrastructure projects through a joint proposal from Financial Services Exchange (Private) Limited and Nedbank. The proposal aims to introduce tradable municipal bonds as a capitalisation instrument to address the city's pressing infrastructure needs.

Municipal bonds, commonly used to fund public projects like schools, roads, and essential infrastructure, are being considered as a long-term financing solution. Bulawayo, like many other cities, faces significant challenges in securing adequate funding to implement its capital budget and replace aging infrastructure.

According to the latest city council report, the local authority recently received the joint proposal from Financial Services Exchange and Nedbank, offering the issuance of municipal bonds as a solution for their infrastructure and development projects.

"Municipal bonds provide a long-term financing solution for public organisations. They are primarily used to finance public projects, such as schools, roads, and other infrastructure developments. The city's infrastructure requires replacement, and funding has been the main challenge," the report states.

The capital budget implementation has struggled due to a lack of long-term funding, prompting the council to seek innovative financial strategies like the proposed bonds. The engagement with Financial Services Exchange and Nedbank will allow the council to fully evaluate the potential benefits and risks of this funding option before making any decisions.

Town Clerk Christopher Dube explained that the current report seeks approval to engage the two organisations for a detailed discussion about the proposal. Following this, a comprehensive report will be submitted to the council for further consideration.

Municipal bonds, as defined by the U.S. Securities and Exchange Commission (SEC), are debt securities issued by governmental entities to fund capital projects. Investors who purchase these bonds effectively lend money to the bond issuer in exchange for interest payments, typically exempt from income tax. Interest rates on municipal bonds are generally lower than other taxable securities due to these tax benefits, making them attractive to risk-averse investors seeking a steady income stream.

The introduction of municipal bonds in Bulawayo could set a trend for other municipalities in Zimbabwe to explore similar financial instruments to attract investment and stimulate local economic growth.

The city's consideration of this innovative funding mechanism marks a critical step towards addressing its infrastructure needs while potentially unlocking new economic opportunities.