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Zimbabwe`s bond market poised for a revival after more than a decade since it last traded.




Zimbabwe`s fixed-income market is poised for a rebirth, following a protracted absence in the southern-African country`s financial markets. The last bond trading activity was in 2001, coinciding with the start of economic turmoil in the country,spanning over a decade – a period now known as the “lost decade.” During this time, together with other economic sectors, Zimbabwe`s debt market was one of the many casualties, eventually capitulating around 2001. Before that, Zimbabwe had a robust fixed-income market with significant bond issuances by government and local authorities in the 1990s.

In recent times,Zimbabwean companies have had to resort to short-term and often expensive funding like bank loans. However, an acute liquidity crunch and the lack of cheap loans in the economy, has made this into a near herculean task for most Zimbabwean companies facing working capital shortages. These companies are also in dire need of capital for retooling. Even with the adoption of the multi-currency system in 2009, the Zimbabwe Stock Exchange (ZSE) has provided little respite for companies seeking to raise much needed capital as depressed stock prices make it expensive to list, further compounded by suppressed trading volumes on the Harare based exchange. Effectively, Zimbabwean companies have been left in the lurch, with no alternative capital raising options in the market.

Times of limited cash-raising options may be coming to an end soon, if the ZSE`s listing rules  for the bond market as well the pricing framework are approved by the regulator, the Securities and Exchange Commission of Zimbabwe. “The ZSE revised the listings requirements for the Debt Market. Revised rules were approved by the ZSE Board and await regulatory approval,” said ZSE Chief Executive Alban Chirume, presenting a paper titled, “Reviving the Debt Market in Zimbabwe” during Zimbabwe`s inaugural debt seminar. “We also drafted a pricing framework for the debt market, which is currently under discussion with the regulator,” Chirume further added.

Although all local Zimbabwean municipal long-term bonds are presently listed on the ZSE, there is virtually no trading of these bonds. This follows a period of economic transition where the equities market has become the mainstay of Zimbabwe`s financial markets. That evolution is far from ideal, as it tends to exclude a significant portion of saving pools like international pension funds. In an attempt to rectify the skew towards equities, the ZSE is now pushing to revive the debt market.Says Chirume; “The ZSE believes that the environment is ripe for the re-launch of the debt markets asappetite from issuers and investors is high.” 

Other regional bourses have reportedly been attracted by the prospect of a resuscitation of Zimbabwe`s fixed-income market. The ZSE is already working with the Botswana Stock Exchange, and this week, officials from the Johannesburg Stock Exchange (JSE)will be in Harare to negotiate on the bonds. “It is a very exciting time for the development of markets on the continent and the JSE is always happy to assist and to learn from our fellow African exchanges,” said Tamsin Freemantle, the Business Development manager at the JSE, in an emailed response to questions on the impending bond market revival in Zimbabwe.

Presently, Zimbabwe`s fixed-income market is valued in excess of $1, 2 billion. A June 2015 report by the Reserve Bank of Zimbabwe showed that commercial banks and building societies in the country held Treasury Bills worth $810 million. This, in addition to the bonds with prescribed asset status worth $437.8 million already in issue, according to the Insurance and Pensions Commission of Zimbabwe (IPEC). Since 2009, there have been several successful bond issues, including the Infrastructure Development Bank of Zimbabwe`s $30 million issue in 2012 to finance ZESA`s –Zimbabwe`s power utility company – prepaid-meter installation program. “Statistics show that the fixed income market in Zimbabwe is already north of $1.2 billion, and can grow with the revival of the regulated ZSE trading platform,” Mr Chirume also stated.

In the past, the ZSE had proposed that all government parastatal bonds be listed on the exchange, a proposal which Finance Minister Patrick Chinamasa approved, in his 2015 Mid-term Fiscal Policy Review. Last year, the RBZ also ditched the 40% limit on foreign investor participation, paving way for foreign investors to participate in both primary and secondary markets fully.




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