Parastatals weigh up Islamic bond issues
STATE-OWNED companies Eskom and Transnet are considering selling Islamic bonds after the government issued its first sukuk at a record-low cost.
Eskom said on Thursday that it would use the sovereign sale as a “barometer” for its own financing plans, while logistics operator Transnet has said it might access the market amid growing demand for sharia-compliant debt.
Global Islamic bond sales have surged 37 percent this year as demand for debt that complies with Islam’s ban on interest lures first-time issuers. The UK sold its first such bond in June, with investors bidding for 10 times the amount offered, while Hong Kong and Goldman Sachs have also tapped the market in the past month. In Turkey, two banks sold the securities within a year of the nation’s first sovereign issue in September last year.
“There’s a huge pool of money trying to access sharia-compliant debt, and when it comes to Africa there’s virtually no supply,” Samir Gadio, the head of African strategy at Standard Chartered, said. “So there will be some interest from corporates, especially in South Africa.”
South Africa sold $500 million (R5.5 billion) of sukuk last week at a profit rate of 3.9 percent, the lowest rate out of 14 dollar bonds issued since 1994. Investors bid for $2.2bn. A record 153 sovereign sukuks have been issued this year.