Zambia Sees $1 Billion in Bond Offers as Stock Market Jumps

Zambia’s stock exchange, Africa’s fourth-best performer this year, is turning to companies and finance institutions to tap growing demand for debt with as much as $1 billion in bond sales as the government boosts spending to sustain growth.

The African Development Bank is set to follow the International Finance Corp.’s local-currency Zambezi bonds that were 4.8 times oversubscribed when 150 million kwacha ($28 million) of the medium-term notes were sold, the IFC said Oct. 3. Standard Bank Group Ltd. (SBK)’s Zambia unit has registered to sell 1 billion kwacha of debt, according to the country’s Securities and Exchange Commission.

“Our markets are certainly poised for a take-off,” Wala Chabala, chief executive officer of the commission, said in a phone interview on Oct. 22 from Lusaka, the capital. “We are having quite a resurgence of capital markets in the country.”

Companies in Zambia, Africa’s biggest copper producer, are benefiting from an economy that’s expected to grow 6 percent this year and 6.5 percent in 2014, according to the International Monetary Fund, as the government tries to accelerate development. Finance Minister Alexander Chikwanda increased spending for next year by 33 percent, with the biggest allocations going to roads, education and health care.

Yields on Zambia’s Eurobonds due September 2022 were little changed at 6.68 percent by 6:21 p.m. in London, the lowest since June 19. The yields have risen 1.25 percentage points this year to yesterday, compared with a 0.97 percentage-point advance in Nigerian debt due January 2021, according to data compiled by Bloomberg.

Price Shocks

Zambia’s budget deficit will probably reach about 8.5 percent of gross domestic product this year, wider than the 4.3 percent earlier projected, Chikwanda said Oct. 11. Africa’s biggest copper producer remains vulnerable to a decline in the price for the metal and an economic slowdown in China, its biggest export market, Moody’s Investors Service said on July 26. The country is rated B1, four steps below investment grade, on par with Ghana and Senegal.

Izwe Loans Zambia Ltd., the local unit of a South African provider of small loans to people without collateral, and Lusaka-based Focus Financial Services, a lender, sold debt on the Zambian bourse worth 31 million kwacha this year. The two companies registered to sell as much as 665 million kwacha.

While the IFC saw high demand for its debt, the sale may have overshadowed Focus’ offer, which was approved in August, Chabala told reporters on Oct. 22. Investors bought one-fifth of what Focus offered in medium-term notes, or 20 million kwacha. The company extended the sale by two months after it was requested by investors, Treasury Manager Francis Mandona Mwape said in an e-mailed response to questions yesterday.

Foreign Buyers

Government plans to start its own provider of small loans probably weighed on Izwe, Chabala said. Izwe sold 11 million kwacha, less than the 20 million kwacha offered after it was approved by regulators in June. Local companies would be more successful in selling debt if they sought more foreign buyers and guaranteed the bonds, Chabala said.

Kamiza Chikula, a Lusaka-based spokesman for Standard Bank’s local unit, Stanbic Bank Zambia Ltd., didn’t respond to a voice-mail message and an e-mail seeking comment yesterday. Olivier Eweck, financial services manager at AfDB’s treasury department, didn’t answer his phone or immediately respond to e-mailed questions yesterday.

The IFC said it can issue as much as 2.5 billion kwacha in bonds and the first tranche is listed on the Lusaka Stock Exchange. The bourse is set to get stock listings before the end of the year from an insurance company and a property company, Chief Executive Officer Brian Tembo told reporters on Oct. 22, declining to identify them.

Agricultural Market

That follows Prima Reinsurance Plc’s listing in September, the first on the bourse since 2008. The exchange’s all-share index (NSEASI) rallied 34 percent this year, the best in Africa after the Ghana Stock Exchange Composite Index (GGSECI)’s 75 percent increase, Kenya’s Nairobi Stock Exchange All-Share Index, which climbed 39 percent and Nigeria’s benchmark gauge.

The exchange may start talks with Zamace Ltd., the Lusaka-based market for agricultural products, about a merger, Tembo said by phone on Oct. 22. He was the head of Zamace before starting his job at LuSE last month.

“The Lusaka Stock Exchange has been having discussions of some sort with Zamace since 2011,” Tembo said. “We want to take that discussion to another level because there are obvious synergies.”

Trading on the agricultural products market has been suspended since 2011, and may resume in May if government introduces laws required for it to do so, Tembo said in August.

To contact the reporter on this story: Matthew Hill in Lusaka at mhill58@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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