Tap into capital markets, advisory firm tells private sector

BUSINESS REPORTER

The private sector should leverage on the local capital markets by raising resources to fund the manufacturing industry, an advisory firm has said.

The government has been a major player on the domestic market, borrowing ZWL$83.36bn last year to finance its programmes.

In a latest report, Mark & Associates Consulting Group said private sector-led debt instruments is the way to go amid calls by analysts that government’s borrowings from the domestic market was crowding out the private sector.

“For example, there is a need to deepen the capital markets through private sector-led debt instruments that could take the form of commercial paper or bonds. This ensures that the private sector is crowded-in while the government focuses on national development projects,” the advisory firm said in a report, Zimbabwe’s Forex Receipts: Facts or Fiction?

“Capital market players should develop relevant product offerings and a vibrant bond market that finances manufacturing sector activity.”

In May, Zimbabwe’s largest cooking oil manufacturer, Zimgold, launched a commercial paper to raise US$5m and ramp up production. The paper has a tenor of 180 days with a coupon rate of 11%.

Last year, the government issued Treasury Bills and bonds worth ZWL$83.36bn. Money borrowed from the domestic market, ZWL$48.11bn came via the auction and the remainder (ZWL$35.25bn) came via private placement.

Outstanding total Treasury bills and bonds, as at end of 2022, amounted to ZWL$129bn with a total interest bill of ZWL$52bn. Nine out of 10 of the Treasury bills and bonds mature in less than 2 years, according to the annual public debt bulletin.

“This reflects a high refinancing risk of the domestic debt portfolio. The medium-term debt management strategy is to lengthen these maturities, to ensure low refinancing risk and debt sustainability,” it said.