Bonds issue to ease housing shortage
Lusaka, Chipata, Livingstone, Ndola and Kitwe, pressed with demand for shelter, seek to generate the money through municipality bonds, the first ever to be issued in the history of the local bourse, to build houses by next year.
Professor Lloyd Ching’ambo, a consultant on national housing bonds, said the first municipality bonds worth US$10 million would be issued on the Lusaka Stock Exchange during the first quarter of 2007.
The pilot project, once successful, would be extended and transformed into a national programme to be assessed by the Special Purpose Vehicle board in consultation with the Ministry of Local Government and Housing and all the 72 municipalities.
“The project would be spread to all districts once it is successfully implemented in the initial municipalities,” Prof Ching’ambo said.
He expressed optimism that the process of raising the US$10 million capital through municipality bonds would be expedited despite being the first case on the bourse, noting that the market was seemingly eager for the project.
Stanbic Bank, the financial advisors and arrangers for the project, were currently developing a model for the bond and would soon advise the SPV on the modalities in mobilising funds.
The process to set up a secretariat for the project was underway. Government this year set up the SPV board of trustees to spearhead the issuance of the housing bonds on the bourse to cut the strain on the national treasury.
The issuance of the municipality bonds has not been undertaken in Zambia before chiefly because most municipalities could not devise their own strategies of raising capital, including on the capital market, because of their hitherto perpetual dependence on the central government to sustain their operations.
Former Lusaka mayor Fisho Mwale recently said municipalities, Lusaka included, had failed to generate equity through such initiatives for lack of innovation coupled with the dependence syndrome on the central government.
“Most councils are literally broke because they are not innovative to raise interest-free equity to meet their needs, including building new houses, after they sold what they had during the reign of President Frederick Chiluba,” he said during a recent interview with The Southern Times.
Most of the councils have gone for several months without remitting wages and salaries to employees and paying retirees their dues for want of resources.
Analysts argue that the current structure and “below par” performance of councils could not adequately attract “credible” market players, such as institutional investors, to underwrite the housing bonds for lack of security.