ZSE bids to revive debt market

THE Zimbabwe Stock Exchange (ZSE) has engaged government to explore raising debt through capital markets, a move aimed at diversifying the country's funding sources and developing the local sector.

THE Zimbabwe Stock Exchange (ZSE) has engaged government to explore raising debt through capital markets, a move aimed at diversifying the country's funding sources and developing the local sector.

A debt market is a financial instrument on which debt securities with a tenor of one year and above are issued, listed and traded.

Such debt instruments include bonds, debentures and notes amongst others.

ZSE chief executive Justin Bgoni told the Zimbabwe Independent on the side-lines of the inaugural Capital Markets Conference in Nyanga this week that it was important for government to take the initiative before the private sector follows.   

“One of the challenges was that the government has not been raising its debt through the capital markets," he said. 

"So, we are trying to get the government to come through the capital markets to raise debt and that helps very much because normally, for the debt market to work you want the government to start, then the private sector will follow. 

"We are talking to the government. It is something that the government is listening to and we hope to get relief over the next few weeks as well."

Bgoni said this will see the government issuing a bond when it wants to raise money.

"If it issues a bond on the market, what it helps is that then the government comes with a benchmark on what the interest rate is. 

"For example, at the moment, if you want to borrow money in ZiG [Zimbabwe Gold], you don't know what the interest is in one year, two years, three years, and five years. 

"So, you want the government to come and issue bonds over that range and therefore create a market for that. So, therefore, if a company wants to raise money (for) three years, five years, they know what the rate is. It helps very much for the government to be the first one. The reason why the government is important is that the government cannot default on its currency."

He added that some of the infrastructure problems that the country was experiencing were due to lack of a debt market that helps channel funds to long-term projects.

Securities and Exchange Commission of Zimbabwe CEO Anymore Taruvinga said there was a need to revive skills and also provide the government with tangible benefits on why they should bring the government paper to the market.

“Not having debt simply limits the available products for our investors and market participants. The AfDB (African Development Bank) puts government domestic debt at US$3,4 billion, and assuming 50% is long term, that (is) at least US$1,7 billion worth of paper,” he said.

In his presentation during the conference, Bgoni said the Victoria Falls Stock Exchange collaborated with other market players to establish the Bond Market Association of Zimbabwe (BMAZ).

“The rationale behind the creation of BMAZ is to create an independent association in Zimbabwe that will be instrumental in fostering market development, advocating for industry interests, enhancing market transparency and integrity and promoting investor confidence and participation,” he said.

The interim board of BMAZ was established and is composed of experienced and knowledgeable individuals who are committed to reviving the fixed income market. They are currently working on establishing the constitution and the strategy for the association. The conference was held under the theme Fostering Zimbabwean Capital Markets for Sustainable and Responsible Investments: Opportunities for Investments.

It drew delegates from across different sectors, including the REITS association, executives from the private sector and state-owned enterprises, stockbrokers, the Association of Asset Managers Zimbabwe, Bond Market Association of Zimbabwe, the Association of Custodians, executives of listed companies and ZAPF- Pension Fund Trustees among others.

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