Brighter prospects for IDBZ

Godfrey Marawanyika


THE chief executive of the newly-formed Infrastructure Development Bank of Zimbabwe (IDBZ), Charles Chikaura, says private investors are keen to up stake in the new ba

nk, ending eight months of uncertainty.


The bank, born out of the Zimbabwe Development Bank (ZDB) suffered hitches at its inception, with shareholders other than the government and the Reserve Bank refusing to acquire additional shares.


Government says the launch of the bank was meant to complement its efforts in the provision of infrastructure development finance by harnessing additional resources from both foreign and local private and institutional investors.


Chikaura this week said he had since met with some of the institutional investors who were keen to increase their stakes.


“To show its commitment to the bank, the government injected $1 trillion and is expected to add more capital in 2006,” Chikaura said.


“The local private sector has shown keen interest in equity participation and it is hoped that some of them will inject some capital in 2006. Government will gradually reduce its shareholding to allow greater participation by foreign and local private investors.”


On the other hand, Zimre Holdings (0,28%), Fidelity Life Assurance (0,18%) and Staff Share Trust who controlled about 6,01% have expressed unwillingness to be shareholders in the bank while Fin Fund, the European Investment Bank (EIB) and African Development Bank (AfDB) indicated their interest to remain as shareholders.


The second largest shareholder is Fin Fund which has 528 000 shares and a stake of 15,86% while the central bank is the third largest shareholder with 350 000 shares that translate to 10,52% of ownership stake.


AfDB has 4 000 shares and a 0,12% stake while EIB has 1 000 shares owning 0,03% of the bank.


Chikaura said that a number of local private sector players have shown keen interest in equity participation in the bank and it is hoped that some of them will inject capital in 2006.


“Obviously, I cannot disclose the identities, but equity participation by private sector shareholders hinges on the private sector receiving an acceptable rate of return on their investment,” Chikaura.


“It is therefore critical and necessary that projects funded by the IDBZ are technically and commercially viable and capable of yielding a commercial rate of return to the investors, otherwise they will shy away.”


Chikaura said that large local and foreign institutional investors may choose to participate by investing their funds or portfolios in bonds issued by the IDBZ, which would then invest those funds in the projects.


He said that with respect to the domestic market, investors currently have a low appetite for long-term paper which is ideally suited for financing long-term infrastructure development projects.


“Investors prefer short-term paper largely because of the skewed nature of the current macro-economic environment,” Chikaura said.


“Enticing investors to buy long-term paper will require structuring bonds that have attractive features.”


Some of the attractive features could include tax exempt status, liquid asset status tradable on the secondary market and a prescribed asset status, Chikaura said.


Currently, government has 2 230 000 shares and a controlling stake of 67%. The IDBZ offers partial assistance or wholly funds provisions for infrastructure development in areas such as energy, road and railway networks, water supplies, housing, agriculture, aviation, telecommunication systems and other critical areas for national development.