The Treasury was set to issue a term sheet for a rand-denominated Islamic bond on Wednesday. In November 2021, the intention was to launch it in the 2021/22 fiscal year as a way of diversifying the debt portfolio and introducing a new set of savers into its funding universe.
It has previously issued a $500 million (R9.4 billion) sukuk bond in 2014, when it became the first African nation to issue a sovereign sharia-compliant bond. At the time it received subscriptions worth $2.2bn and it will be hoping for a similar over-subscription when it launches its rand-denominated bond.
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 to set a benchmark for state-owned companies seeking diversified sources of funding for infrastructure development.
It said the sukuk bond had an investor distribution consisting of 59% from the Middle East and Asia, 25% from Europe, 8% 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 $2bn in foreign bonds despite the S&P downgrade and the transaction was oversubscribed.
Since 2020, the Treasury has received various loans from international development institutions such as the International Monetary Fund and World Bank, both to provide Covid-19 relief as well as loans for a Just Energy Transition.
In fiscal year 2022/23 the Treasury received R64.5bn in foreign loans, compared to R31.3bn in 2021/22. It expects to receive only R45.94bn in 2023/24 and R36.9bn in 2024/5.