The first South African rand bonds were put out by the BRICS bank

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The so-called BRICS countries started a development bank. On Tuesday, the auction for its first South African rand bonds ended. The bank is under pressure to raise more money and give more money in local currencies.

Two bonds from the New Development Bank (NDB), a 1 billion rand ($52,3 million) five-year note and a 500 million rand ($30 million) three-year note, got a total of 2.67 billion rand in bids, which two buyers told Reuters about.

In an interview with Reuters before next week’s BRICS summit in Johannesburg, South Africa’s finance minister said that the NDB, which was set up to give the BRICS members (Brazil, Russia, India, China, and South Africa) more control over development financing, wasn’t doing enough lending in local currency.

When asked for a statement on the bond auction, the NDB did not give one.

In a recent interview with Reuters, the bank’s Chief Financial Officer Leslie Maasdorp said that the bank wants to increase local currency loans, most of which has been in Chinese yuan so far, from about 22% to 30% by 2026, but that de-dollarization has its limits.

In the past few years, it has been hard for the South African bond market to get enough new issuers to meet the rising demand from domestic investors looking for good credit assets.

The price of NDB’s three-year rand bond was 95 basis points (bps) above the three-month Johannesburg Interbank Average Rate (Jibar), and the price of its five-year rand bond was 105 bps above Jibar.

Raphi Rootshtain, a portfolio manager at Sasfin Wealth, said that the last similar South African government bonds were a 4.5-year bond priced at Jibar +90 bps and a 7-year bond priced at Jibar +120 bps.

Rootshtain said, “It is interesting to note that most of the loans made in South Africa are to State Owned Companies (SOEs).” “This means that the NDB will become the new way for SOEs to get funding, which should come with more risk.”

Standard Bank, which didn’t want to say anything, and Absa Bank set up the bond sale.

Absa’s head of debt capital markets, Kumeshen Naidoo, said that for this sale, “94% of bids were at or below the price guidance, and the issuance rates were the tightest spreads achieved by a non-government issuer in 2023.”

($1 = 19.1206 rand)