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Zambia to Sell $1.5 Billion Roads Bond as It Starts Tolls

Zambia’s Road Development Agency plans to sell $1.5 billion of bonds by the end of the year, the latest state-owned company to tap international debt markets after the country sold its first dollar notes last year.

The agency has presented a plan for the sale to Finance Minister Alexander Chikwanda and expects to receive feedback by the end of the month, Bernard Chiwala, director for the Lusaka-based company, said by mobile phone yesterday.

“Toward the second half of the year we will have concluded that,” he said. “It is our expectation that we will be able to raise about $1.5 billion.”

Zambia raised $750 million through its first Eurobond sale in September. Demand for the debt exceeded supply 24 times, encouraging companies in Africa’s biggest copper producer to take advantage of investor appetite for its debt. The Lusaka City Council is looking for advisers in its planned $500 million bond sale, it said Jan. 2. Zesco Ltd., the power utility, also plans to raise as much as $2 billion.

Yields on Zambia’s dollar-denominated debt due September 2022 have dropped 18 basis points, or 0.18 percentage point, since the bonds started trading in September to 4.99 percent today. The kwacha weakened 1.2 percent to 5.27 per dollar by 11:08 a.m. in Lusaka, the capital, taking its decline this year to 1.5 percent.

Road Repair

“It will take three to six months to crystallize everything,” including hiring bookrunners and advisers, Chiwala said.

The roads agency plans to securitize the bond with the revenue it generates from a fuel levy, he said. The towns of Livingstone, which straddles the Victoria Falls World Heritage Site, and Solwezi, in the copperbelt, should follow Lusaka in selling international municipal bonds, Deputy Finance Minister Miles Sampa said Jan. 8.

“They are correct in identifying the fact that there is a lot of liquidity in international markets and a lot of that is looking for a home in high-yield instruments,” Yvette Babb, an emerging-market strategist at Standard Bank Group Ltd.’s South African unit, said by phone from Johannesburg. “There are question marks as to how those organizations would be able to service that debt.”

Part of the proceeds of the planned bond sale will go toward funding a 1.6 billion-kwacha ($303 million) project to repair 2,000 urban roads across all 10 of Zambia’s provinces, Chiwala said. President Michael Sata announced the project yesterday.

Toll System

The RDA, as the agency is known, also plans to start building a toll-gate system across Zambia’s national road network by the end of the year, Chiwala said.

“We are working on the design of the toll booths,” he said. “We are expecting by June we will have concluded this plan,” with building to begin in the second half of the year, he said.

The routes the government will initially focus on tolling are those linking Livingstone, the tourist capital in the southwest, and Nakonde, bordering Tanzania in the northeast.

It will also charge fees for motorists using the Great East road, linking Lusaka to Malawi, Chiwala said. The road joining the copperbelt towns in northern Zambia will also probably be tolled, as well as upgraded to dual-lane carriageways, he said.

The governments of Botswana and Zambia earlier this month appointed engineers in charge of building the planned $260 million bridge that will link the two land-locked countries at Kazangula, said Chiwala. All the required funding has been secured for the project, he said.

Motorists and pedestrians currently use a ferry to traverse the Zambezi River that separates Botswana and Zambia at Kazangula.

“We are planning to start the construction next year in April,” said Chiwala. It will take four years to build the 923-meter (3,028-foot) bridge, he said.

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