More rand-denominated New Development Bank bonds to come, says Maasdorp

Leslie Maasdorp, the New Development Bank (NDB) vice-president and chief financial officer. File picture: Ian Landsberg/African News Agency (ANA).

Leslie Maasdorp, the New Development Bank (NDB) vice-president and chief financial officer. File picture: Ian Landsberg/African News Agency (ANA).

Published Aug 24, 2023


Leslie Maasdorp, the New Development Bank (NDB) vice-president and chief financial officer told Business Report on the sidelines of the 15th BRICS Summit in Johannesburg that the bank was looking at issuing a further R500 million bond this year, but the size and tenor would depend on market conditions in September and October.

“We have an annual funding plan and this year we are looking at issuing $6 billion (R113bn) in total, a quarter of which will be in yuan. 2022 was a tough year and we are no longer lending to Russia due to the sanctions, with which we are fully compliant. We issued $1.25 billion in US dollars in April and the equivalent of $1.3 billion in yuan, so we still need to issue more bonds to meet our target,” he said.

On August 15the NDB successfully issued its debut rand-denominated bond in the South African bond market, becoming the highest rated issuer to issue in this market since 2015.

The book was well supported, with more than R2.5bn in bids across both the 3- and 5-year tranches allowing NDB to exercise its option to upscale the trade from R1bn to R1.5bn.

On August 22 the NDB and Trans-Caledon Tunnel Authority (TCTA) then signed a R3.2bn loan agreement for the implementation of Phase II of the Lesotho Highlands Water Project (LHWP).

The TCTA will use the funds to construct the Polihali Dam and reservoir, a 38-kilometre-long water transfer tunnel, roads and bridges, telecommunications infrastructure, and will extend electricity and other development infrastructure to Lesotho.

By increasing the yield of the Vaal River Basin by almost 15% in the long run, the project will support economic growth of the people of Gauteng, a highly urbanised and industrialised province which is responsible for 36% of South Africa’s gross domestic product. Three other provinces (the North West, Mpumalanga and Free State provinces) will also benefit directly from the increased water supply resulting from the project.

Water-stressed South Africa has been looking for ways to supplement the natural water of South Africa’s industrial heartland, the Gauteng province, for decades with feasibility studies undertaken in the 1950s that showed that the water supplied by gravity feed from Lesotho was more economically sound than trying to pump water from the lower-lying Orange River to the high-altitude Gauteng.

It was not, however, until the 1983 and 1985 droughts brought home the impact of how dire the need was with water having to be pumped from the Vaal River to the Mpumalanga coal-fired power stations, that a treaty between Lesotho and South Africa was signed in 1986.

The original treaty envisaged several phases, but so far only Phase 1A (the Katse dam and water transfer tunnel to South Africa) and Phase 1B (the Mohale dam and water transfer tunnel to Katse) have been completed. At peak construction, the former provided some 22 000 jobs and the latter 15 400. Total project costs were near R17bn.

The treaty for Phase II was signed in 2011 and the original intent was that increased water would flow in 2020, but several changes of water ministers meant that this deadline has been repeatedly pushed out and first water is now only expected in 2028 as it was only earlier this month that the diversion of the Senqu river by the pre-cofferdam was completed. This will allow the subsequent diversion of the river into and through the diversion tunnels ahead of the construction of the cofferdam upstream of the Polihali dam wall.

The Polihali dam adds 2.33 billion cubic metres in storage capacity to the LHWP and will increase the current annual supply rate capacity from 780 million cubic metres to 1.27 billion cubic metres, contributing towards meeting South Africa’s increasing water needs.

“Our new president, former Brazilian president Dilma Rousseff, has injected new energy into the bank. As she is a former president she has several high level contacts and I am sure that under her tutelage we will further expand our loan book to promote economic development,” Maasdorp concluded.

Helmo Preuss: Economist at Forecaster Ecosa