Councils to issue infrastructure bonds
GOVERNMENT is considering giving local authorities the green light to issue infrastructure bonds that will help create adequate accommodation for the rapidly rising small to medium enterprise sector.
The exponential growth of the informal sector in most cities has created a huge infrastructural void as councils are failing to accommodate the small businesses that have become a major stakeholder in the country’s economic revival.
And with local authorities struggling to break even, capital to finance infrastructure projects has been limited, or non-existent in some instances.
Addressing local and international delegates at a Local Authorities Investment Conference in Harare last week, Finance and Economic Planning Minister Patrick Chinamasa said allowing local authorities to issue bonds to finance various infrastructure projects could be the solution to such problems.
He, however, said Government could only allow authorities whose finance management systems are in order to issue such bonds.
“Government will assist those local authorities whose finances are in order. We cannot continue to put money into a botomless pit. We can only put money where finances are well managed,”
“For those local authorities that are well managed I can sign off on that while I am blindfolded and give authority for you to raise loans by way of infrastructure bonds but you would need to demonstrate how that bond will be retired,” stated Minister Chinamasa.
The country’s local authorities have not recovered from a cumulative US$ 500 million loss incurred from the Government directive for household debts write-off in 2013 which the finance minister said was regrettable and very unlikely to happen again.
‘‘The situation has been exacerbated by the massive current debts owed to the councils by residents and businesses.
Observers have welcomed the idea of issuing infrastructure bonds as a timely intervention which can lure development partners into investing in local authorities given massive infrastructure opportunities to tap into.
Zimbabwe has a total of 92 local authorities but most of them have been crippled by corruption and gross mismanagement.
Economic analysts Mr Kipson Gindani told Post Business in a telephone interview that financing for infrastructural projects through issuing bonds was prudent given the country’s poor investment flows but required stringent and efficient management systems to avoid more legacy debts for the country.
“Government has issued just above US$2 billion in Treasury bills and this idea of infrastructure bonds as a country we need to be cautious about how we hope to retire these bonds bearing in mind issues of mismanagement of funds. We have to set up sound management systems for this system to work and not create problems in the long run.
“We need fresh capital to unlock real value for the emerging businesses through provision of adequate infrastructure but we also have to constantly check on our borrowing which has a huge bearing in the long term for the country,” said Gundani