Lyubov Pronina and Robert Brand

THE GOVERNMENT had appointed BNP Paribas, KFH Investment and Standard Bank to arrange a debut sukuk sale of at least $500 million (R5.3 billion), the National Treasury said yesterday.

Investor meetings would be held in Europe, Asia and the Middle East next month, Tshepiso Moahloli, the director of debt issuance and management at the Treasury, said. Meetings would run from September 8 to 12, said people with knowledge of the proposal, who were not authorised to speak publicly.

“A sukuk issue may follow but the timing will depend on market conditions,” Moahloli said. “South Africa is looking to issue a benchmark-size sukuk.”

First-time sales of bonds that adhere to Islam’s ban on interest are set for a revival from the worst quarter in more than four years, with Luxembourg and Hong Kong seeking to market debut issues next month. Kenya, Bangladesh and Indonesia also announced plans to sell sukuk this year amid investor demand for bonds yielding more than developed nation debt.

Islamic bond sales have fallen 82 percent to $2.6bn this quarter compared with the previous three months, their lowest since the first three months of 2010, Bloomberg data show.

“External market conditions remain favourable at the moment,” Samir Gadio, the head of African strategy at Standard Chartered, said. “Issuers are trying to come to the market before there is any re-pricing associated with further normalisation in US monetary policy.”

Former finance minister Pravin Gordhan earmarked $1.5bn of foreign issuance over this and the next two fiscal years in his last Budget in February, including a sukuk of as much as $500m. The government sold its first euro-denominated bonds in more than eight years and issued 30-year dollar bonds last month.

Standard & Poor’s cut South Africa’s rating to BBB-, on par with Russia and Brazil, in June, with a stable outlook. Fitch Ratings has a negative outlook on a BBB assessment. – Bloomberg