Zambia’s Industrial Development Corporation (IDC), an institution with private rights established in 2014 by the Zambian Government to promote economic growth and diversification in the country, has recently announced that it plans to issue USD 500 million worth of private bonds in the international markets.
The announced was done by President Lungu’s spokesman Amos Chanda, whom in an interview with Reuters said that the IDC currently owns all the Government’s stakes in all Zambian state-owned companies, after the property transference process finalized in August 2015.
Therefore the IDC is ready to issue bonds in the international markets as a private entity without Government guarantees, explained Chanda in the interview.
The date of the issue as well as the banks to be in charge of underwriting the bonds have not been disclosed yet by Chanda or any other Government’s official.
According to Bloomberg IDC would use the money raised from the bonds’ issuance to invest in other sectors as energy and transport, in order to diversify the Zambia’s economy.
This is not the first time the IDC announces a raise of capital through either an issuance of bonds or sale of shares.
On August 20th, 2014 IDC planned to sell bonds and stakes in all state-owned companies to mainly boost local employment, explained IDC Corporate Affairs Director Charles Mate.
It was not concreted since IDC didn’t own all stakes in all state-owned companies at that time according to Bloomberg.
For the Zambian Government it is cheaper to issue bonds under a private entity rather than as a public institution since according to World Bank statistics, the country’s risk premium is currently below zero at -3.8% making private borrowing cheaper than public one.
According to Bloomberg, Zambia is one of few countries together with Japan where private entities pay cheaper credits than those from the Government.