The Zambian government has recently announced that the privatisation of 32 out of 34 state-owned enterprises (SOEs) in the country is completed with the total transference of public stakes to the Industrial Development Corporation (IDC).
The transference of shares and assets to the IDC, an institution with private rights established in 2014 by the Zambian Government to promote economic growth and diversification in the country, is part of Zambia’s strategy announced in August, 2015, to issue USD 500 million of Eurobonds as a private entity in international markets.
The government has not completed yet the transference of stakes at Mofed Tanzania Limited and Mofed London since these companies were incorporated out of Zambia, however, the process will finish soon and the money and assets acquired by the IDC will be used to strengthen its financial structure, explained IDC CEO Andrew Chipwende.
The transference is in line with the government’s directive to make the IDC a fully private entity without government guarantees, Mr. Chipwende added.
The 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 and drive industrial development.
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, the 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.
Zambia is one of few countries together with Japan where private entities pay cheaper credits than those from the Government.