AMA agro bills fail to entice market
http://www.theindependent.co.zw/
Thursday, 22 December 2011 15:10
Reginald Sherekete
THE recently floated Agriculture Marketing Authority (AMA) bills failed, yet
again, to entice the market with the tender raising only US$17,7 million
from the required US$50 million, despite the special features placed on the
bills.
The AMA agro bills had received special features which included prescribed
asset status, liquid asset status and tax exemption status. But the market
continued to shun the AMA agro bills with the tender only receiving total
bids of US$31,9 million, an indication of the tight liquidity in the market.
Bids attracted rates as high as 19,75% with the lowest at 10%. The average
weighted rate of the allotment was 11,27% which fell way below the average
annual rates which average 18% currently prevailing in the money market. The
liquid asset status meant that holders of the bills, especially banks, can
access overnight accommodation from the central bank to cover their
positions so that they can meet their obligations.
The prescribed assets-status was crafted to attract institutional investors
like pension funds and insurance companies since they are required to hold a
certain percentage of their portfolios in government bonds.
Despite a tax exemption, a first since dollarisation in 2009, this failed to
tickle the market. The government, through AMA, intended to raise money to
finance agriculture. It was forced to extend the first tender of US$50
million to December 15 after the financial advisor –– CBZ Bank –– indicated
that potential bidders needed more time.
Despite the extension, the market still showed no appetite for the agro
bills which have a tenor period of 360 days. “With a tenor of 360 days, the
market is not keen to buy into these AMA agro bills considering the
prevailing market forces where the demand side of money is outstripping the
supply side,” an analyst said.
Government, which is seeking to raise US$100 million, is expected to be back
on the market with another tender this week. Out of the US$100 million to
be raised, US$56,2 million will finance communal, A1, A2 and commercial
farmers’ input requirements, while the remainder will be used to clear
liabilities from last season.
Government plans to direct US$21 million to the Grain Marketing Board to
settle its arrears with farmers for maize deliveries made last season.
Another US$18,6 million will go towards clearing liabilities to seed and
fertiliser firms that were not paid for supplies under government-backed
schemes.