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Home Business

Blantyre City council mulls over municipal bonds

by Orama Chiphwanya
24/02/2016
in Business
2 min read
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Blantyre City Council (BCC) mulling over the possibility of issuing municipal bonds, which are securities issued to raise money for the city’s infrastructure needs.

BCC mayor Noel Chalamanda, in an interview last week in Blantyre, said plans are underway to issue bonds that could be listed on the Malawi Stock Exchange (MSE) to finance infrastructure developments such as roads, bridges, hospitals, sewer tanks and water systems, among other projects.

Chalamanda: We have been in talks with banks
Chalamanda: We have been in talks with banks

“We have already been in talks with [commercial] banks and experts in stock market on how we can issue bonds, but also with councillors on how we can raise funds to issue bonds,” he said.

In other countries, municipal bonds are issued by States, cities and counties.

MSE chief executive officer John Kamanga, in an earlier interview, said without necessarily listing on the stock market, the issuance bonds on the stock market is prudent for both government entities and corporates to raise capital.

He said: “There are lots of infrastructure developments that are undertaken by several commercial and government institutions.

“If such entities realise the benefits of raising bonds, they will have an upper hand in raising capital at a relatively cheap cost through long-term financing, which can be taken through long-term bond issuance unlike the short-term which has been the case all along.”

Kamanga said government had already set precedence in issuance of bonds, expressing optimism that once the bonds are listed on MSE, they entice others, especially State-owned enterprises to do the same.

NBM Capital Markets Limited assistant research analyst Paul Mojoo, however, said issuance of municipal bonds could fail because the risk still remains high.

“Investors may be hesitant in locking their funds for long-term,” he said.

Bonds are investment instruments with low entry cost and highly efficient, transparent and convenient investment tools designed to appeal not only to institutional, but also to retail investors.n

Tags: BCC
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