Lilongwe City Council has unveiled plans to issue an infrastructure bond to raise capital for the city’s development.
The council’s director of commerce Genscher M’bwaba said on Tuesday in Lilongwe that plans are at an advanced stage and they are working in collaboration with some commercial banks, but fell short of disclosing the amount expected to be raised.
Meanwhile, financial market experts have commended the council’s move, saying issuing a bond is plausible way of raising capital for infrastructure development, adding that it has worked in other countries.
In an interview on Wednesday, Malawi Stock Exchange (MSE) chief executive officer John Kamanga said they have been in touch with councils on the opportunities the local bourse provides in raising capital for infrastructure development.
“The MSE provides opportunity on both equity side and bonds and the central government has utilised the bonds aspect for a while now and this is what the city councils can also utilise for their infrastructure development,” he said.
Kamanga said the council can work with the banks who can frame the bond in such a way to raise funds through the MSE or to issue the bonds on their own.
He said the capital market has idle money that should go into productive investments boost to economic opportunities as well as provide product diversity in form of infrastructure bonds.
Said Kamanga: “There are idle funds coming from the pension industry, which now amounts to K2.7 trillion and every year, there is an injection of about K170 billion in the economy.
“The MSE has absorbed about 40 percent of those funds and we want the funds to be channelled towards productive areas.”
When asked why there is still underutilisation by the councils in raising capital for infrastructure development through the MSE, he said there have been issues of awareness and capacity which are being addressed through constant engagement.
Economist Lesley Mkandawire said in an interview on Wednesday that the key people in the councils are risk averse, as such, they do not make ground breaking moves in financing infrastructure development.
“We are risk averse and as a result we accept the status quo and leave things the way they are, but that must change because the city councils have several areas of investment opportunities that can help boost their revenue,” he said.
Mkandawire, a former Reserve Bank of Malawi economist, said infrastructure bond is the best option which can bring cheaper capital and with immediate returns.
In 2017, Roads Fund Administration made a maiden move to issue a K10 billion bond through a commercial bank to raise funds for the country’s first interchange in Lilongwe.
The bond was issued by MSE-listed NBS Bank in collaboration with Nico Asset Managers.
The facility was supposed to be repaid over five years using the fuel levy which is managed by RFA
