Comesa, SADC, EAC now planning regional infrastructure bonds

An aerial view of the port of Mombasa. Photo/FILE.

Municipal bonds are issued by local authorities and are seen as a cheaper and safer way to raise cash for big infrastructure projects such as roads, railways and construction of housing.

To successfully list a bond in the market, the issuer is required to meet key financial benchmarks including sustainable debt levels, positive cashflows and a profitability record.

They are considered public debt instruments and are usually guaranteed by central governments. City Council of Nairobi is said to be working on a Ksh100 billion ($1.1 billion) municipal bond to be floated in the local market to fund building of roads, water and health infrastructure.

Municipal bonds are issued by local authorities and are seen as a cheaper and safer way to raise cash for big infrastructure projects such as roads, railways and construction of housing.

To successfully list a bond in the market, the issuer is required to meet key financial benchmarks including sustainable debt levels, positive cashflows and a profitability record.

They are considered public debt instruments and are usually guaranteed by central governments. City Council of Nairobi is said to be working on a Ksh100 billion ($1.1 billion) municipal bond to be floated in the local market to fund building of roads, water and health infrastructure.

Africa’s three key trading blocs are planning to float joint infrastructure and municipal bonds.

While the officials would not give details on the size of the bonds, they estimate it would cost the region about $93 billion to fix its infrastructure in the next decade as members seek to join the ranks of middle-income economies.

The regional economic bodies are working together to raise funds for key infrastructure projects on the Northern, Central, Lamu and Djibouti corridors.

Comesa Secretary General Sindiso Ngwenya said the bonds could be floated in 2012.

Issuing municipal and infrastructure bonds across the region would offer an opportunity for investors who are looking for safe investment bets as stockmarkets turn bearish on the back of growing uncertainty over the growth of local economies as the US and Eurozone slow down.

In most stockmarkets in the region, shares and benchmark indices have been falling over the past few weeks as investors worried by the world’s troubled economic outlook and the prospect of their returns being eroded by sharply weakening currencies take cover in less-risky instruments like bonds.

Kenya has already raised nearly $1 billion through infrastructure bonds over the past four years to fund road, energy, water and irrigation projects.

Kenya’s Central Bank last week began selling a 12-year infrastructure bond valued at $195 million, targeted at Kenyans living abroad.

Infrastructure is one of the biggest challenges facing the region, given the huge investment needed to build roads, ports, railways and airports as well as water and energy projects.

Shift in financing

Issuing regional bonds will mark a big shift for the regional blocs, which have been banking on donor financing to fund infrastructure projects as huge budget deficits left governments unable to meet such expenditures.

Municipal bonds are issued by local authorities and are seen as a cheaper and safer way to raise cash for big infrastructure projects such as roads, railways and construction of housing.

To successfully list a bond in the market, the issuer is required to meet key financial benchmarks including sustainable debt levels, positive cashflows and a profitability record.

They are considered public debt instruments and are usually guaranteed by central governments. City Council of Nairobi is said to be working on a Ksh100 billion ($1.1 billion) municipal bond to be floated in the local market to fund building of roads, water and health infrastructure.