ZAMBIA is poised for unprecedented infrastructure development following the successful issuance of a US$750 million maiden record-breaking Eurobond on the international market, Finance Minister Alexander Chikwanda has disclosed.
Mr Chikwanda has stated that this was the start of unfolding development for Zambia, which would be at a rapid pace.
Coming in as if to seal the streak of milestones scored as the Patriotic Front (PF) clocks one year in office this month, the bond issuance reflected the importance that Government attached to raising economic standards to benefit Zambians.
Mr Chikwanda said: "The challenge is still huge but we have started on a good note and more is yet to come, we have to continue working hard."
The 10-year Eurobond attracted more than 450 reputable investors across the globe, with US investors leading at 56 per cent, followed by Europe-based investors at 40 per cent, three per cent from Asia while one per cent was made up of investors from different countries.
"We have not done badly in our one year in office. The tax threshold was adjusted, we still have a huge task ahead of us, we need to work," Mr Chikwanda said.
He said the borrowings from the Eurobond would be channelled to infrastructure development mainly roads, health, education and energy sectors.
Mr Chikwanda said details of funding would show a predominance of outlays to the power sector.
In this vein, $186 million would be allocated to the Government's equity into the Kafue Gorge Lower hydro-power scheme.
Mr Chikwanda during a media briefing in Lusaka yesterday said the sovereign bond represented Zambia's high rating by the international community.
He observed that it was important to use this goodwill to get Zambia onto a sustainable development course.
He said the objective was achievable as long as the country remained committed and improved its work ethic, which currently left much to be desired.
The minister said the issued bond had surpassed the country's expectations as it had planned to only issue a bond of $500 million as stated in last November's budget address.
The bond was on account of the exceedingly large order book with a total subscription of $11.9 billion, which according to Mr Chikwanda worked out at 24 times over and above the intended amount of the $500 million.
"This is not only the largest order book for sub-Saharan Africa this year, but also at 5.375 per cent the lowest coupon, meaning the most favourable price.
"That Zambia is able to garner such huge and unprecedented interest from the international investor community is ample and irrefutable testimony of the confidence the world reposes in Zambia," he said.
He said the categorical expression and affirmation of faith by the international community on Zambia was not only on account of management of the economy but a reflection of respect for the rule of law and zero tolerance on corruption.
The minister said fund managers would not risk placing their investment in a country with a volatile and unstable economy, but that the sound investment climate prevailing in Zambia had triggered continued investor confidence.
"All our borrowings will be spent on growth promoting projects and the social sectors of the health and education," he added.
He thanked the international community for the confidence they had placed in Zambia and praised Barclays Bank and Deutsche Bank, the lead managers and joint book runners for the efforts to ensure the success of the bond issuance.
The size of the bond also meant that Zambia would be eligible for the JP Morgan Emerging Markets Bond Issuance Global index, increasing its appeal to major investors.
Zambia had been rated B+ by Fitch and Standard and Poor's. This was necessitated by the buoyant copper mining sector, political stability and Gross Domestic Product growth of over six per cent as its strength.
And the Private Sector Development Association (PSDA) has praised the Government for the successful issuance of the bond, describing it as a milestone to the continued building of investor confidence in Zambia.
PSDA chairperson Yusuf Dodia said the Zambian team led by Finance Deputy Minister Miles Sampa deserved great appreciation for the successful road shows to market Zambia's Eurobond especially that it generated a success story from US investors.
"It is a good development, Mr Sampa and his team deserve a pat on the back for a job well done. As a country we are on the right course of building investor confidence and it shows that we are on the right path.
"By going on the international market it shows we can raise a lot of money for infrastructure growth at a low interest rate," Mr Dodia said.
via Times of Zambia
