daniel chigunwe
Nelson Gahadza
The Victoria Falls Stock Exchange (VFEX) says the Bond Market Association of Zimbabwe (BMAZ) has entered a collaborative arrangement with its Botswana counterpart to enhance the capacity and contribution of bond markets in the two countries.
VFEX is confident that the establishment of BMAZ in April will significantly contribute to the overall growth and stability of Zimbabwe’s bond market.
The rationale behind the creation of BMAZ was to create an independent association in Zimbabwe that would be instrumental in fostering market development, advocating for industry interests, enhancing market transparency and integrity, and promoting investor confidence and participation.
In its third quarter 2024 newsletter, VFEX said BMAZ and the Botswana Bond Market Association (BBMA) signed a memorandum of understanding (MOU) as part of ongoing collaboration with a view to enhancing the capacity and capability of each organisation and contributing to the development of bond markets in Zimbabwe and Botswana.
“The key objectives of the MoU are to facilitate information sharing, including research findings, market insights, best practices, and regulatory frameworks, and to promote peer learning through mutual capacity-building activities and other collaborative initiatives,” reads the newsletter.
The interim board of BMAZ, chaired by Mehluli Mpofu, managing director of CABS, is comprised of experienced and knowledgeable individuals who are committed to reviving the fixed income market.
A bond market is often referred to as the debt market, fixed-income market, or credit market.
Governments usually issue bonds to raise capital to pay debts or fund infrastructural improvements, while publicly traded companies issue bonds to finance business expansion projects or maintain ongoing operations.
Analysts believe the country’s financial ecosystem is shallow, with the fixed income market as good as dead due to sub-inflation returns.
The government has over the years been working on modalities to issue a US$100 million bond on the VFEX as part of the domestic mobilisation of funds for infrastructure and deficit financing.
However, according to Finance, Economic Development, and Investment Promotion Minister Professor Mthuli Ncube, the process is largely being slowed down by the cost of providing insurance.
“What we wanted was to buy some insurance globally in order to raise the credit standing of the bond, but then it turned out that the insurance was so high as the extra yield we had to pay as a Government without insurance.
“Because without insurance, we have had to pay for the extra yield, which was almost as high as the insurance, and it was expensive. So we have to prove that. Let us re-examine this so that we do not end up paying too much as insurance on the bond.
“Therefore, we have started reworking on it, and we will come back to the market on progress on the bond offering,” he said earlier in the year.
According to the Minister, the bonds will be issued to complement Government resources needed for the rehabilitation of roads, upgrading and equipping public healthcare facilities, as well as investments in irrigation infrastructure.
It is believed that Zimbabwe requires US$2 billion annually to finance its economic infrastructure.
First Mutual Holdings (FMHL) chief executive, Doug Hoto, believes the pensions industry is deliberately avoiding monetary investments, but should the Government issue a USD bond, the insurance and pensions industry will not hesitate to invest.
“If Zimbabwe issues a USD bond today, we will buy it or even run out of stock as the industry seeks to protect its members,” he said earlier.
Hoto said pension funds, through the required 15 percent offshore investments, are invested in the deposit receipts of the AfreximBank and the TDB depository receipts of the PTA Bank as a way of protecting policyholders and managing country risk.
Bongani Ndlovu