Excitement on Markets as Rwanda Issues Third Bond, Reports KT Press

    KIGALI, RWANDA, November 26, 2014 /24-7PressRelease/ -- Rwanda has issued an Rwf15Bn ($21.8million) Treasury Bond, seeking funds from local and international investors to complete ongoing infrastructure projects including convention-center and power-plants.

The bond is also part of the country's broader strategy to boost its infant capital-market industry, which has been growing exponentially, according to government.

The 7-year-bond, announced on November 21, by Finance Minister Claver Gatete and Central Bank governor, John Rwangombwa, follows two other bonds that were oversubscribed by 140% and 232% respectively. The first and the second were also Rwf15bn each, with a five-year maturity period.

In May the International Finance Corporation tested the appetite on the local market by issuing an Rwf 15.5bn ($22 million) bond selling at rate of 12.5% per coupon, which was oversubscribed by 110%.

Minister Gatete said the success of previous bonds showed increased confidence in Rwanda's economy and its financial market, anticipating the third bond to be oversubscribed too.

Indeed, brokerage companies are taking up the task to sell to the primary market until the end of November before selling to secondary market. "I predict more than 200% over-subscription," says Shehzad Noordally, the Chief Executive Officer of CDH Capital Ltd, a local stock agent.

Meanwhile, government is mobilizing local investors to buy the bond. "Campaigns done countrywide helped Rwandans understand the importance of buying the bond," Minister Gatete said. "We believe the bond could be more subscribed than before."

Previous bonds saw participation from institutional investors (pension-funds, insurance companies) increase from less than 10% to more than 50% while the foreign participation (banks, institutions and retailers) rose to 8% from virtual non-existence.

Economists say Rwanda is a risk-free economy with minimal inflationary risks and an economic growth-rate averaging 8% over the past decade. According to Noordally, there is immense thirst among foreign investors to buy Rwanda's bonds, but they are inhibited by the 15% capital-gain-tax. Investors are hoping government will review the tax burden.

Nevertheless, Robert Mathu, Executive-Secretary of Rwanda's Capital Markets Authority, says the latest bond offers a rare investment opportunity and helps "boost operations on the country's stock exchange".

Mathu said the bonds are also increasing savings across the country. The government has pledged to release quarterly bonds, a move observers say will trigger saving and investing culture among Rwandans.

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