LIVINGSTONE MARUFU
Listed financial services group, ZB Financial Holdings (ZBFH) says it will be a tall order to find takers for its proposed new commercial paper meant to raise funds for road rehabilitation as the economy faces an uncertain future.
The decision to defer the rolling out of the proposed ZWL$1bn infrastructure bond coincides with the coming in of an unnamed new major shareholder owning 37.79% in the group after a total of 66 528 658 shares worth ZWL$1.6bn exchanged hands this week.
The cash-rich National Social Security Authority was previously the major shareholder with 37.79%, while Transnational Holdings Limited, which is controlled by Nicholas Vingirai, is the second major shareholder with a 21.44% stake in ZBFH.
Last year, the lender shelved the bond plan due to acute shortage of foreign currency and hyperinflationary pressures.
There was, however, hope that the plan would be revived this year following some bit of stability in the economy.
But ZBFH group chief executive, Ron Mutandagayi, told Business Times this week that the timing was not right yet to float the proposed financial instrument.
“Although we have enjoyed a bit of stability since June, the economic situation is still dire,” Mutandagayi told Business Times.
“(Therefore), when you try to raise funding through bonds (whose interest) is around 10% per annum and inflation is hovering above 400%, the money markets are not giving as much returns. So, the infrastructure bond raising hangs in the balance.”
He added: “As previously pension funds won’t disburse their money towards that project, insurance companies won’t give you money as the bond raising will give them massive negative interest rates thus raising bonds is next to impossible given the economic environment.”
Mutandagayi said the group has not started any formal discussions with ZINARA regarding further capital raising, adding it was something the group intends to look at in the New Year.
“We are encouraged by the move by the Minister of Finance to peg the toll fees in US$ though payable in ZWL at the ruling foreign exchange auction rate. This will significantly enhance ZINARA’s cash flows and create a case for another debt instrument,” he said.
Two years ago, ZB Capital, a unit of ZBFH struggled to raise US$150m meant for road rehabilitation due to the inflationary environment and equivocal monetary regime.
The lender only raised ZWL$68m of the required total amount.
The US$150m was meant to neaten up the country’s road network.
The condition of Zimbabwe’s road network has deteriorated over the past few years because of lack of funding for routine and periodic maintenance.
Official data obtained from the Ministry of Transport and Infrastructural Development showed that nearly 80% of Zimbabwe’s road network is in poor condition.
The amount of resources required for the country’s road network rehabilitation and development is enormous, analysts said this week.
Most roads are now way beyond their design life and are in an advanced state of disrepair after being used for the past 60 years.
According to recent studies by the African Development Bank and the World Bank, Zimbabwe requires a staggering US$5bn to rehabilitate the country’s entire road network that has been affected by years of neglect.
A recent report by the Ministry of Transport and Infrastructural Development estimates that Zimbabwe’s 95 000 kilometres (km) road network needs to be attended to.
Of these, about 17,400km tarred roads, which fall under the national government and urban authorities need to be upgraded or maintained while about 77,000km of gravel and earth roads that largely fall under the government, rural district authorities and the District Development Fund, are also in need of attention
In February 2017, the government declared that the country’s roads were a national disaster.
Consequently, road authorities including the Department of Roads, District Development Fund, urban and rural district councils embarked on the Emergency Road Rehabilitation Programme to restore and expand the country’s road network to improve safety conditions on roads plagued by a scourge of traffic accidents. But, the projects have been hampered by lack of funding in the past few months.
In June this year, Zinara, disbursed about ZWL$143.3m for maintenance of roads countrywide.
The department of roads in the Ministry of Transport and Infrastructural Development, District Development Fund, urban and rural district councils were the beneficiaries of the funds.
