Harare to issue $100m bond for city projects

Published: 18 July 2017

HARARE City Council is planning to issue a $100 million bond to finance projects with a bias towards housing schemes as the local authority moves to reduce the national housing gap.

Harare Mayor Councillor Benard Manyenyeni told The Herald Property Guide that discussions over the structure of the bond were still ongoing.

"We are still in discussions with the Local Government, Public Works and National Housing Ministry. Harare is in need of major investments in terms of infrastructure and actually requires in excess of $100 million. But we need to test the market's capacity."

Clr Manyenyeni said that the bulk of the funds would go towards housing, not only because there is a long waiting list, but there is revenue assurance and the security required to repay the funds.

"After those deliberations, we will have a clear path on whether we go the Zimbabwe Stock Exchange route or we push them through private players. As you are aware, municipal bonds have not featured in a long time."

He added that Local Government Minister Saviour Kasukuwere is expected to seek prescribed asset sta¬tus for the project in order to appeal to pension funds and insurers.

"We are also aware that roads need rehabilitation but according to the country's laws a road bond can only be issued by the road authority, which in this case is Zimbabwe National Road Authority (Zinara). The minister, however, has an inclination towards roads but there could be challenges there. In any case the revenue recovery and assurance is lower."

The initiative to raise funds on the capital market is influenced by council's unfavourable revenue collection ratio which currently stands at 50 percent. Council is also owed close to $500 million in unpaid bills by the private sector, residents and Government and therefore the decision to approach the market to raise capital for infrastructure projects such as maintaining the road network and housing delivery, among other projects.

Compounding council's woes was that Government took away the mandate to collect vehicle licence fees from local authorities and authorised Zinara to collect the fees. This means council is forced to divert rev¬enue from rates towards road main¬tenance which takes a huge chunk of council's budget.

Minister Kasukuwere also recently said Government is aggres¬sively pursuing various initiatives including partnering with the private sector, to provide housing for millions with the national housing backlog.

This comes as Government has been offering incentives to property devel¬opers who are actively trying to close the national housing gap.

"Zimbabwe, like any other developing country lacks the financial resources to respond the rapid urban¬ization. Where such funds are available, the cost of borrowing is too exorbitant.

"Public Private Partnerships (PPPs) offer possible solutions but, however, these should be accompanied by appropriate safety nets to guard against the vulnerable groups in our society," said Minister Kasukuwere.
- the herald