10 August 2017

Zimbabwe: ZB Floats $60m Zinara Bond for Road Repairs

Zimbabwe National Roads Administration (Zinara), through ZB Bank, is floating a $60 million bond to spruce up the country's road network, half of which was recently damaged by rains, ZB Financial Holdings Chief Executive Officer Ron Mutandagayi said.

Subject to its success, another $40 million bond will be subsequently issued, bringing the total resource envelope to $100 million, he said.

The road fund administrator's hand in tapping the capital markets has been strengthened by last year's $50 million bond -- floated by the Infrastructure Development Bank (IDBZ) -- which was oversubscribed by more than 17 percent.

Once raised, the funds will be committed to the Emergency Road Rehabilitation Road Rehabilitation Programme currently underway. CEO Mutandagayi told The Herald Business that the bonds would be floated on the market once Zinara's logistical plans are outlined.

"Out of the $100 million Zinara bonds, we will be floating $60 million as soon as the road administrator's logistics are in place. "There is still time to raise another $40 million; we will see how the first deal goes," he said.

The emergency road rehabilitation programme, which is divided into two phases, was commissioned after President Mugabe on February 24, 2017 officially declared a state of disaster on the country's roads and road infrastructure.

While phase one of the project focuses on preserving the integrity of the current network by rehabilitating the drainage system, patching potholes, clearing culverts and repairing bridges, the second phase involves periodic maintenance, re-gravelling, resealing and reconstruction of bridges.

Essentially, Zinara is raising short-term debt through leveraging on 2017 disbursements. The first tranche of infrastructure bonds issued by IDBZ, particularly to fund road works, appears to have encouraged a healthy appetite for similar bonds backed by the highly liquid institution.

Zinara chief executive officer Engineer Nancy Masiyiwa-Chamisa recently noted that though the fund was considering floating a bond that was "even double or thrice the value" of the first, it was not going to "over commit".

She, however, indicated the fund's liquid status -- being a cash-generating business -- means investors are aware that it cannot default on its obligations.

Zinara collects around $130 million annually from road access fees, vehicle licensing fees, transit fees and fuel levy, among other revenue streams.

The recent Visual Road Condition and Inventory Survey, which was conducted in 2016/2017 by the country's road authorities, including the Zimbabwe Local Government Association (Zilga), concluded that $5,5 billion is needed to bring the country's road network to trafficable state, as 30 percent of the total road network is "in poor to very poor condition".

According to the assessment, of the country's 98 000-kilometre road network, 40 percent is in fair condition, 17 percent is good, while only 8 percent is very good. But the money raised from the local market is now having a telling effect.

A chunk of funds from the first tranche of the bond issue are being used to rehabilitate a 800-metre stretch from Forbes border post which, according to South African construction firm Group Five, was not covered in the scope of works of the $207 million deal to rehabilitate the Plumtree-Harare-Mutare road.

The road, which links Harare to its second-biggest export market after South Africa(absorbing goods and services worth more than $268 million in 2016), is being dualised, while weigh bridges and an overnight parking lot are also being constructed.

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