Kigali’s municipal bond expected in 2 years

Road construction in Kigali. Among the projects to benefit from the funds raised from the proposed bond will be road construction. FILE PHOTO | NATION MEDIA GROUP 

In Summary

• Nyarugenge, Gasabo and Kicukiro districts, which make up the city have been asked to come up with viable business projects to present to investors.
• While Kigali City Council (KCC) is yet to reveal the exact amount it needs, the funds are expected to be used in key infrastructure projects.

Rwanda plans to issue district municipal bonds in the next two years to raise development funds to cut back on the current heavy reliance on central government funding.

While exact details are yet to be released, the process is expected to begin with the capital Kigali, which was forced to shelve its plans to issue a $73.3 million municipal bond in 2009, following advice by Dyer & Blair Investment Bank that its revenue collection was still low, making borrowing difficult.

However, the city’s revenue sources are now expanding supported by the country’s rapid economic expansion in recent years.

Nyarugenge, Gasabo and Kicukiro districts, which make up the city have been asked to come up with viable business projects to present to investors.

“Taxes and fees have now increased from around Rwf9 billion to about Rwf17 billion. We are also fixing public finance management. We think that between now and next year we can start (on the process of issuing a bond),” Kigali vice-mayor in charge of finance and economic development Alphonse Nizeyimana told The EastAfrican.

While Kigali City Council (KCC) is yet to reveal the exact amount it needs, the funds are expected to be used in key infrastructure projects.

KCC gets its revenue from property tax, trade licensing, rental income tax and other fees such as land rent.

But the city needs approximately $3.4 billion to finance basic infrastructure such as roads, street lighting and a central sewerage and solid waste treatment system, according to its master plan designed by Oz Architecture and the Singapore-based Savannah Group.

The projects are in the first phase of implementation and are scheduled to be completed by 2015.

In recent years, the city council has come under fire for delaying key projects even after expropriating land for in-city road extensions. For example, plans to to extend main roads by 54 kilometres by the end of the year have been put on hold due to lack of funds.

Rwanda Capital Markets Authority executive director, Robert Mathu says guidelines and regulations for the issuance of municipal bonds have already been published.

The trust law, which makes it mandatory for bond issuers to first have some form of collateral was also passed.

“If you look at every issue, whether it is equity or debt (on Rwanda Stock Exchange) —it is always oversubscribed. I think that is a clear indication that the demand side is ready. The challenge we have is the entities themselves,” Mr Mathu said.

If KCC issues a municipal bond, it will encourage Kampala, which plans to issue a $6 billion municipal bond by June 2015 to finance infrastructure development.

READ: Kampala plans $6bn bonds issue