Rwanda issues its first international ten year bond

The Sub-Saharan state of Rwanda, under the presidency of Paul Kagame, plans to raise $400m in the début sale of a ten year government bond.

Investors have shown a great deal of interest in the $400m decade- long bonds, auctioning a total of $3bn to buy up the bonds. The sheer size of the orders allowed the interest on the loans to be reduced from the initial 7.5% per annum to 6.875% per annum.

The central African state, infamous for five years of civil war culminating in a 1994 genocide is now recognised as one of the fastest growing economies in the world whilst ranking the least corrupt, according to Transparency International.

Growth in the state has hovered at 8% per annum since 2003 with inflation well under control, giving it a perfect foundation to start borrowing off investors comfortably.

The Rwandan state will use the $400m to repay previous loans of $200m, finance infrastructure such as a hydropower project and airline RwanAir with $50m and spend $150m on the completion of the convention centre in its central city Kigali.

The state is also planning to sell stakes in some of its state owned companies in agriculture, services, transport and banking in a push towards privatisation.

Investors have increasingly been attracted towards emerging and frontier markets in an attempt to pull their money out of Europe which is seen as increasingly over indebted, risky and low yielding. This has started an arching trend as more and more investors pledge their savings into emerging markets in an attempt to steer clear of western countries involved in sovereign debt crises.

As in the Rwandan deal the amount of investors attracted towards Africa and Asia to place their money has been slowly auctioning down the interest yield demanded, making it cheaper for countries in these continents to attract loans to finance themselves.

Several Sub-Saharan states now enjoy cheaper rates than Italy or Spain which is likely to continue as the crisis deepens in the West and Africa enjoys steady growth.

Florian von Hartig, of South Africa’s Standard Bank, said: “There’s not enough African bonds to satisfy demand”. Nick Darrant, from BNP Paribas, which along with Citigroup is managing the Rwanda bond sale, concurred, adding: “The supply and demand is immense.” 

Patrick Corby