The National Treasury will still launch a rand-denominated Islamic bond in 2021/22 as a way of diversifying the debt portfolio and introducing a new set of savers into its funding universe. This was confirmed at the media briefing on the Medium Term Budget Policy Statement (MTBPS).
It had previously issued a US$500 million Sukuk bond in 2014, when it became the first African nation to issue a sovereign Shariah-compliant bond. At the time, it received subscriptions worth US$2.2 billion and it will be hoping for a similar over-subscription when it launches its rand-denominated bond.
The Treasury said at the time that the decision to issue an Islamic bond had been informed by a drive to broaden the investor base and set a benchmark for state-owned companies seeking diversified sources of funding for infrastructure development.
The sukuk bond had an investor distribution comprising 59 percent from the Middle East and Asia, 25 percent from Europe, 8 percent from the US and the balance from the rest of the world.
S&P Global Ratings cut South Africa’s credit rating to junk in April 2017 when Pravin Gordhan was fired as Finance Minister by former President Jacob Zuma.
In 2018, the Treasury issued US$2 billion in foreign bonds despite the S&P downgrade and the transaction was oversubscribed.
Further issuance of US$3 billion is expected in 2021/22 and over the next three years, government will raise an additional expected US$10 billion in global capital markets.
BUSINESS REPORT ONLINE