By Africa Links 24
Published on 2024-01-18 14:47:56
The Lusaka Securities Exchange has listed the first ever green bond, which was a major $200 million issuance. The Copperbelt Energy Corporation’s subsidiary, CEC Renewables, issued the bond and plans to use the capital raised for renewable energy projects across Zambia, focusing on solar, wind, and other sustainable initiatives. The bond attracted significant interest, with the initial $54 million fully subscribed upon its listing, indicating strong demand from banks, financial institutions, and impact investors.
Joseph Gombwa, manager of debt and trade solutions at FNB Zambia’s corporate and investment banking division, believes that the issuance of the first green bond will encourage the development of capital markets in Zambia. He noted the oversubscription of the bond by 178%, indicating the appetite for such projects and suggesting the potential for more listings and issuances in the future.
M’khuzo Mwachande, an investment banker in Cape Town, also sees the high interest in the green bond as positive for Zambia’s capital markets, acknowledging that the country is finally attracting the attention of investors who prioritize environmental, social, and governance (ESG) considerations.
However, Mwachande remains skeptical about the extent to which Zambia can grow its capital markets given several major obstacles. He highlights the limitations imposed by the country’s pension system, as citizens can access tax-free drawdowns on their pensions after contributing for two years, leading to short-term investment approaches and undercapitalization. He believes that reforms to the pension system are crucial to unlock the full potential of Zambia’s capital markets, emphasizing the need for comprehensive saving plans and long-term retirement schemes.
The Zambian government has shown willingness to address these challenges and enhance its capital markets by considering reforms such as reducing or waiving corporate actions fees, making regulations more business-friendly, and integrating the market with others in the Southern African Development Community (SADC) to increase liquidity. Additionally, the government aims to incentivize major companies to list part of their shareholdings, fostering a more dynamic and efficient market.
Overall, the listing of the green bond is seen as a positive development for Zambia, with potential to encourage sustainable investments and further development of its capital markets.
