New German-backed Africa fund seeks to invest in Zimbabwe bonds

Local banks are set to boost their underwriting capacity following the launch of a $32 million fund to finance projects in renewable energy, agriculture and small to medium enterprises, the fund managers said today.

The Africa Local Currency Bond Fund (ALCBF) was launched last Thursday in Frankfurt, Germany and was established by the German government-owned development bank, KfW on behalf of the German Federal Ministry for Economic Cooperation and Development.

Lion’s Head, a merchant bank that operates out of London and Nairobi and United Capital Asset Management, a part of United Capital — one of Africa’s leading investment banks and part of billionaire Tony Elumelu’s Heirs Holdings — were appointed to manage the fund.

While KfW has so far invested $32 million for the initial capitalisation of ALCBF, fund managers are expected to grow the pot to over $100 million in the medium-term.

United Capital’s head of marketing, Toyin Awesu, said that Zimbabwean banks and other financial institutions qualify to apply for funding in any bond issue.

“Banks in Zimbabwe and other African countries can issue local currency bonds and approach the fund to invest in their bond,” she said, adding that the fund can, however, only take up to 30 percent of any bond issuance.

“The  fund’s aim is to invest in local currency bonds issued by local issuers across Africa — excluding South Africa — by providing anchor investment in bond issuances which in turn aids placement and local capacity.”

With Zimbabwe facing funding constraints and the high cost borrowing on the local market, bonds are now seen as a tool for plugging funding gaps.

Awesu said the fund would invest in “any bond issuance with investment grade rating where the sector focus, use of proceeds and beneficiaries are developmental in nature,” said Awesu.

“We are currently scouting for suitable target issuers — SMEs inclusive — that fit the profile across Africa.  All administration and monitoring is done between (United Capital and Lion’s Head) as we have a universal fund management platform running to ensure this is done.”

She said SMEs would have to work with financial advisers who can help them structure a bond. They can then issue the bond and invite the fund to invest.-The Source

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