(Business in Cameroon) - The Republic of Congo is about to launch a series of three fungible treasury bonds (T-bonds) on the government securities market of the Bank of Central African States (Beac), the central of Cemac countries (Cameroon, Congo, Gabon, Chad, CAR, Equatorial Guinea). The total envelope sought with the T-bonds, with 2, 3 and 5-year maturity is CFAF120 billion, or CFAF40 billion per operation, official sources reveal.

According to EDC Investment Corporation, the arranger of this operation, the respective interest rates on these bonds are 5.9%, 6.1%, and 6.5% respectively.

This information is contained in a correspondence sent by the arranger to banks operating in Cameroon, a country whose investors account for 70% of the securities’ subscriptions made on the CEMAC money market since its launch in 2011.

Like Cameroon, which has been successfully implementing a long-term financing mobilization strategy on the money market since 2019, leaving the financial market on which its treasury has been active since 2010, Congo is thus turning to the Beac's public securities market for long-term loans.

"The money market is the traditional market on which treasuries and banks issue T-bonds, whose average loan terms are longer than bonds’ (on the financial market, editor's note). T-bonds provide a longer grace period for the government, as the principal is not repaid until the end of its maturity, unlike bonds, which are usually repaid in quarters from the second year onwards," explains Samuel Tela, Director of Treasury at the Treasury General Directorate of the Ministry of Finance.

This official is presented as the main architect of this strategy of refocusing the Cameroonian Treasury's fund-raising operations on the money market, instead of the unified Central African stock exchange.

No flexibility

The question remains whether Congo is trusted by investors the same way as Cameroon and whether the country could replicate the same success story the Cameroonian treasury is writing on the BEAC money market since the launch of its series of T-bonds in April 2020 (CFAF201.7 billion raised in five operations between April and May, including a 10-year T-bonds issuance operation). The most tempting answer is a big no.

Firstly, unlike Cameroon, which is mobilizing financing to carry out infrastructure projects, Congo is looking for funds to clear its debts and relieve the public treasury.

According to the correspondence sent to Cameroonian banks, the operation aims to raise a total amount of FCFA120 billion to refinance the outstanding bonds of the 2016-2021 bond issued on the regional market (to raise FCFA150 billion). These outstanding bonds are estimated at FCFA92.2 billion and are held by the bank syndicate. The funds raised during that operation will also support the budget (minimum FCFA 27.5 billion, according to the correspondence). This notably indicates the solvency of Congo.

Secondly, the arranger of this T-bonds issuance program imposes a fair subscription clause on investors for the three announced operations.

“Subscriptions will be allocated evenly on the three proposed T-bonds,” EDC Investment Corporation writes. This clause removes any flexibility investors could have since it does not allow them to choose which T-bond to invest in, a source close to the money market notes. "The proposed rates are very close, regardless of maturity,” the source adds, noting that all these could scare investors away.

Brice R. Mbodiam