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‘FISCUS NEEDS PROPPING IN TERMS OF FUNDING SUPPORT’

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MBABANE - Following the numerous loans the government is making as well as the changes in monetary policies and bond issues, Business Eswatini calls for change in ‘ease of doing businesses’.

Eswatini Government and the World Bank have invested over E1.5 billion in economic recovery projects but the country seems to be moving backwards. The Central Bank of Eswatini (CBE) issued retail bonds last month. “Our fiscus needs propping up in terms of funding support,” This was mentioned by Business Eswatini Chief Executive Officer (CEO) Nathi Dlamini yesterday.

Revenue

Dlamini said this was necessary, especially against the backdrop of the pandemic which has dried up the country’s revenue streams. He said the sharp escalation of basic commodities like fuel and other basic necessities, like food would sooner or later demand some form of intervention from government, in the form of subsidies perhaps. “The war in Ukraine has further compounded the problem and there’s no apparent end in sight. But here is what’s important: Fiscal and financial prudence should continue to be tenets that are observed by government because we cannot borrow funds only to waste them on projects which benefit a few, or at worst, have no discernible benefit to the country at large,” Dlamini said.

The CEO added that we needed to rein in corruption, especially on big projects where it’s been conjectured that big money being lost in bales. He said he had been following the debate on the proposed government bond issuance programme with keen interest. Government bonds are issued by governments to raise money to finance projects or day-to-day operations. The Ministry of Finance sells the issued bonds during auctions throughout the year.

Market

Some treasury bonds trade in the secondary market. Dlamini mentioned that he listened to almost everyone who had something to say about this programme, including financial professionals; he said some had argued for the programme and others had been ambivalent at best, for a wide array of reasons. The CEO also attested that the intricate language of finance, especially of sovereign debt financing, was only understood by a few if not exclusively by the protagonists of the programme such as the capable minister of Finance and his team. “It took me a while to explain the concept to my colleagues in the office and yet all of them are highly educated. So, I’ll say good luck to the Minister of Finance Neal Rijkenberg in explaining this to the nation as it’ll be a tall order,” he said. Dlamini further mentioned that he has followed financial markets for the better part of 25 years, especially the Johannesburg Stock Exchange (JSE) and the aggregate daily trends and performance of traded securities on the world bourses, in particular the JSE All Share Index (ALSI) on which the minister of Finance proposed to trade our sovereign bonds.

Bonds

He said what the minister was proposing is not new at all. This country has been issuing bonds and treasury bills to the Eswatini public for many years. CBE has opened up an opportunity to investors through the issuance of bonds at a fixed coupon rate of up to 10.25 per cent. Generally, central banks issue bonds as one way to raise money and they a good investment opportunity for businesses to make good yields. A bond functions as a loan between an investor and a corporation. The investor agrees to give the corporation a certain amount of money for a specific period of time. In exchange, the investor receives periodic interest payments. CBE re-opened government bonds to the sum of E200 000 with coupon rates fixed at 8.75 per cent, 9.00 per cent, 9.50 per cent and 10.25 per cent last month.

Maturity

While each bond sum is set at E50 000, the coupon rates vary and so does maturity. Investors looking for long term investment coupled with higher yields would be suited for the SG057which is set at a coupon rate of 10.25 per cent. This bond will be redeemed in October 29, 2031. There is also a bond, SGO54, which will mature earlier, within a period of two years on October 29, 2022. According to CBE, this one is priced at a coupon rate of 8.75 per cent. Also, there are two more others; one set is set coupon rate of 9.00 per cent and matures in 2026, while the other matures in October 2028 and is valued at coupon rate of 9.50 per cent. The bonds will be issued using competitive multiple bid auction model and open to public including individuals, corporate and institutional investors.

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