Zambia, Africa’s biggest copper producer, plans to sell its first international bond this year, raising $1 billion for rail and power projects, Finance Minister Situmbeko Musokotwane said in an interview with CNBC Africa.
The government expects to have its first sovereign credit rating by the third quarter and will proceed with the bond sale soon after that, Musokotwane said in Abidjan, the commercial capital of Ivory Coast.
Zambia abandoned a plan to seek a credit rating and sell a bond abroad in 2008 after the global financial crisis sparked a sell-off of emerging market assets. The southern African nation joins countries including Kenya, Ghana and Angola that want to tap international capital markets to help finance the building of power plants and railways as economic growth accelerates.
“We have issues with energy,” Musokotwane told CNBC. “There are a number of roads that have to be rehabilitated.”
The minister said he expects a credit rating of higher than B+, which was awarded by Standard & Poor’s and Fitch Ratings to Angola last week. B+ “should be the minimum,” Musokotwane said.
The minister signed an agreement with JP Morgan Chase & Co. today to help the government prepare for the credit rating. Zambia is working concurrently on the rating and the bond sale, he said.
Copper and Growth
The economy will probably expand more than 6 percent this year, boosted by higher copper prices and a bumper grain crop, Musokotwane said. Copper prices have more than doubled since the beginning of last year and reached as high as $6,935 a ton in London today, while the government expects a 42 percent surge in grain output this year.
Musokotwane said he wasn’t overly concerned that the European debt crisis would make it difficult for Zambia to sell its bond.
The kwacha has dropped 5.7 percent against the dollar since the beginning of this month and was trading as high as 5,090 per dollar today.
–Editors: Philip Sanders, Karl Maier
To contact the reporters on this story: Nasreen Seria in Abidjan at [email protected].
To contact the editor responsible for this story: Peter Hirschberg at [email protected]
[Bloomberg]
While this move may be welcome, one would wish to know where those railway lines we intend build will be. Have we already identified the areas we want to be serviced by those railway lines or we want to get umuchanga first then start thinking of where to construct the railway lines later? Are we going electrical or dobadoba? If electrical, are the power projects also targeted at addressing the electric railways line projects?
Dongo, we have professionals in govt. they have all the details. AND When you apply for a bond you have to provide the nessecary information to back it
I think it’s better to wait till after the elections . We dunno if the current govt will continue. Unless they are sure that they will win . This is a long term policy issue.
# The Lord SITH….I hear you but if a project is good, it should carry on regardless of which govt comes in. After all, if its PF comming in, all those issues you think are long term, they will all be done in 90 days! :d:d
L T , what’s up with this flag? …..What country is that ?..Have you now flagged me as an official PF kaponya?………..:o
# 2 Positivist pa zed
“we have professionals in govt. they have all the details”. Fine. But may be since there are professionals in govt who have the details, it would be useful for the Zambian public to know what those details are in terms of location of the power and rail projects. For roads we know that roads like Kamloops will be rehabilitated since it is established that annually they have to be poorly mended. So rehab of roads is not a new thing since it is a dedicated ATM. Therefore, just in case you have leakage about which rail and power projects have been planned in the details the professionals in govt have, I would be grateful.
# 4 The legacy…haha!….ye, i forgot about the 90 days., but seriously , yes , ideally a good project shld carry on regardless , but if there is a change in govt next yr , i just have this old fear of the UNIP to MMD transition when there were too many axes to grind , and even good projects fell victim to the axemen. I fear this disease is still with us.
#7 The Lord SITH
Following your line of argument, I totally agree with you that despite these planned projects being good it may not be a guarantee that they would be carried forward by another regime. I guess that is what defines us as being Zambian – we are always beginning
This is good news.Finally govt will have access to cheap money to finance long term capital projects which could not be done by the current short-term borrowing offered by the local financial market at suicidal interest rates.Lets hope these Credit rating organisations will give us a favourable rating.
what are “credit ratings”? Someone to help me pls
# 6 Dongo Na Sundu….’So rehab of roads is not a new thing since it is a dedicated ATM’ :d you have a point there my dear. Its makes one sick to see just how people siphon money from GRZ. If all roads were done properly and some money not gone to build people’s houses (as Teta once put it), The whole country would have good roads by now.
# 7 The Lord SITH….I share your fear. The UNIP- MMD transition was a nightmare Zambia will take long to recover from. While it took a few years for FTJ and group to sell the Companies UNIP built, it will now take 90 days to undo whatever little good there is…..ooops! I mean to develop Zambia.
Whichever leader comes into power there will still be GRZ, they will need roads to drive on, and they will also need electricity. Isn’t that what PF says, that they will build roads and new power stations in 90 days? Now isn’t it better that we start to undertake these projects now? Then in 2011 we can use the 90 days to commission the projects.
#12 Katie Good….in 90 days, all of you will be recalled :d:d:d
#10, A credit score is a number between 300 and 850 that lets lenders know if you’re a risky or a responsible borrower. This complex number is derived by a number of factors. The credit bureau determines: Do you pay your bills on time? Do you pay your bills at all? Do you have enough credit? Are you approaching your credit limit? Can you manage a diverse credit portfolio? It may sound confusing to calculate, but you can get a copy of your credit report to see what your history says about you. On this report, you should look for a number above 760, which is considered “Good Credit.” If your score is in the 600s, you’ll want to take steps to achieve a better score. If you’re below 600, your access to loan opportunities is already limited.
#14 you maybe right for personal credit in the USA or elsewhere, as for countries the score is out of 100 with Norway being the best at 94% and Canada, where I am, at 8 with 86.09. USA doesn’t make the top 10 but I don’t see them borrowing externally anytime soon. These are A class ratings and Zambia will likely start with low B class rating, it’s a good way to start but let’s not get too excited cause we are bad at paying our debts!
The first audit in three years revealed thefts- dubbed “mis-appropriations” in the Road Agency. What road projects did the Agency service? No one is prosecuted, how much the theft siphoned we dont know; attempts at salvaging anything- none.
And we should really be so foolish to accede to the same thieves informing us they yet have plans to constipate us under more debt.
Collateral- that copper prices have surged, but we have sold copper for millenia. That our graineries have surpassed projections this year. All this is short-term, which shows chronic myopia.
There are many valid points raised by others here, one solid one is, we lack a secure structure called government. An oft transplanted tree never prospers; whats we have been. I cud develop this…but for space, and perhaps time..
This is good news and this is part of what Harvard and Oxford educated Dr. Dambisa Moyo has been writing in her Times best seller DEAD AID.
I am glad I read the book when I did and it seems part of the recommendations she made including the International Bond Markets and Foreign Direct Investment seems to be taking place in Zambia.
I am sure Dr. Moyo is happy and proud the many recommendations she made are taking part in her very own country Zambia.
Good Move Zambia as I am sure with a high rating, we’ll be able to borrow at much lower rates.
This is absolutely ridiculous! selling an international bond for $1billion is a fancy way of saying borrowing $1 billion.Do we need more debt honestly? we don’t even manage the little money we have well.these issues should be debated in parliament.Zambians should have a say as to how much debt govt is allowed to get us into.[-(
Issuing International Bond for Infrastructure Money is a very progressive and visionary move the Banda administration is ambitiously doing.Its time for capital projects around the country. No doubt financing development projects through sovereign bond issues would assist our country expands its fiscal space even as our domestic tax revenue base and collections is exponentially growing to the percent of our GDP. Angola’s Bengwela, Namibia’s Walvis Bay, and Mozambique’s Nankala railways here we come with RB stirring the ship to tangible development. President Banda is very serious with national development. We have to connect, and reconnect with reliable servicing networks in SADC with commercially operational rail and road networks.
What shocks me is, why hasn’t the govt set up a Credit Bureau in Zambia considering that credit is an integral part of everyday life? In this way,worthy customers will have access to lower rates cos currently first time borrowers are considered high risk hence higher rates even when they do their bills in good time all cos of lack of the Bureau.The current system works well for the banks cos they reap superprofits at the expense of good and hardworking borrowers.
We should also understand that the issuance of a sovereign bond would necessitate wide ranging economic reforms to open up sectors of the economy that are still under Government control.
Such reforms could involve more lifting of Government current account control which limits foreign exchange transactions and restricts sale of Government securities to foreigners. But the aggregate gain to the country outweighs any debatable detriment. I endorse this ambitious move but an ambitious leadership of MMD.
Forward with the nation and backwards with utopia of 90 days. Already investment wise the country has taken in US $1.3 billion within the first half of 2010. This is in excess of the forecast an indication that the country is vigorously expanding its tax revenue base through real investment.We need to see more public-private leadership on capital capital projects.Our collective determination has the propensity to turn Zambia into a successful story of responsible capitalism in an open society.
I endorse this ambitious move by an ambitious leadership of MMD.
Zambia should learn from other countries that have experience with sovereign bonds such as those in Latin America. The question of “The Original Sin” is a major issue why others countries are regreting the move. This concerns the perceived capacity to repay the debt given the financial status and the exposure due to a volatile exchange rate. Regradless of the sovereign rating S&P will give, Zambia is not ready on both counts. Besides an earlier blogger was right to suggest we wait until the elections are over. Before this point the rating and the interest rate on the bond will reflect this political risk. Yes professionals are there in government, but how do their ideas reach the top?
This is great! Our government is working. Way to go! Lets use the money for the intended pupose so the projects themselves payback. Situmbeko be mindful of possible debt chokes in your investment appraisals.