The primary ever inexperienced bond has been listed on the Lusaka Securities Trade in a significant $200m issuance, elevating hopes that this might immediate additional improvement of capital markets in Zambia.
The Kitwe-based Copperbelt Power Company issued the bond by its subsidiary CEC Renewables and intends to make use of the capital raised for photo voltaic, wind, and different renewable power tasks throughout Zambia. The preliminary $54m tranche has been totally subscribed since its itemizing final week, with Zambia’s inaugural inexperienced bond attracting curiosity from banks, monetary establishments, and affect traders.
Joseph Gombwa, supervisor of debt and commerce options at FNB Zambia’s company and funding banking division, tells African Enterprise that “the issuance of the primary inexperienced bond will definitely encourage the event of capital markets, within the sense that there’s sturdy urge for food from market gamers, comparable to banks, to finance inexperienced tasks given the broader drive to help extra environmentally sustainable tasks.”
“This urge for food is evidenced by the truth that the bond was oversubscribed by 178%,” Gombwa provides. “Going ahead, we should always see extra listings and issuances given the curiosity from funders to take part in related tasks.”
M’khuzo Mwachande, an funding banker in Cape City, agrees that the excessive ranges of curiosity within the inexperienced bond reveals that “Zambia is lastly on the radar for many traders, particularly these which might be incorporating ESG and sustainability into their funding choices.”
“By and huge, the issuance of a inexperienced bond is a constructive improvement for Zambian capital markets,” Mwachande says.
Nevertheless, he’s sceptical in regards to the extent to which Zambia can develop its capital markets on condition that a number of main obstacles to development nonetheless stay.
“Wider reform is required if Zambia is to see all the key issuances and listings that all of us wish to see in Lusaka.”
Pensions reform ‘wanted to spice up trade’
Maybe most significantly, Mwachande factors out that the character of Zambia’s pension system limits the quantity of capital that may circulation into the Lusaka Securities Trade.
“In Zambia, residents can entry tax-free drawdowns on their pensions after contributing for 2 years – residents obtain gratuities each couple of years. That is versus different pension techniques which encourage residents to take part in long-term retirement plans that final for many years,” he explains.
This short-term method, which additionally contributes to macroeconomic points comparable to excessive rates of interest, signifies that institutional traders comparable to pension funds are much less more likely to put money into securities and capital markets. This “undercapitalisation” in flip makes markets much less liquid and, because of this, extra vulnerable to inaccurate pricing, additional deterring traders.
He believes {that a} new method to the nation’s pensions is essential whether it is to unlock the complete potential of its capital markets. “Reforming the pension system by eliminating the gratuity schemes and implementing complete saving plans might result in an elevated variety of fund managers who can act as market makers,” Mwachande says.
“This might facilitate correct worth discovery for property listed on the Lusaka Securities Trade, contributing to a extra dynamic and environment friendly market.”
The federal government has indicated that it’s ready to look carefully at capital markets regulation, within the hope of attracting the funds required to develop Zambia’s renewables sector and different strategic industries.
Mwachande notes that ideas have included lowering or waiving company actions charges to extend trade exercise, making the Securities Act and Lusaka Securities Trade itemizing guidelines extra business-friendly, and integrating Zambia’s market with others within the Southern African Improvement Group (SADC) to spice up collective liquidity. The federal government has additionally talked about incentivising main mining and telecommunications corporations to checklist a part of their shareholdings within the hope of encouraging different companies to observe, he provides.
