MTBPS: Treasury to expand Islamic Bond Programme following R20bn success
In discussions with Treasury officials during the lockup in Pretoria, Treasury expressed interest in issuing more Islamic bonds following a successful launch in November 2023. However, the timing remains uncertain.
“We will give the market one or two weeks' notice of any intention to issue an Islamic bond, but we are not sure whether it will be in this fiscal year or next fiscal year,” a Treasury official stated.
On November 29, 2023, Treasury announced the successful launch of the first sovereign Rand-denominated Al-Ijarah Sukuk on the African continent. This landmark transaction raised R20.386 billion and comprised four tranches with maturities ranging from 5.3 years to 12.3 years.
The transaction saw a 1.74 times oversubscription with investor demand from a diverse base, including South African banks, large Islamic funds, and Islamic banks. Thirteen unique bidders participated in the auction.
Treasury had previously issued a $500 million (R8.9 billion) Sukuk bond in 2014, marking the first African nation to launch a sovereign Shariah-compliant bond. That issuance attracted subscriptions worth $2.2bn, and Treasury hopes for similar interest with its rand-denominated bond.
At the time, Treasury noted that the decision to issue an Islamic bond was driven by a desire to broaden the investor base and to set a benchmark for state-owned companies looking for diversified funding sources for infrastructure development. The 2014 sukuk bond attracted investors primarily from the Middle East and Asia (59%), followed by Europe (25%), the US (8%), and other regions.
Since 2020, Treasury has secured various loans from international development institutions, including the International Monetary Fund and World Bank, aimed at Covid-19 relief and funding for a Just Energy Transition. Over the medium term, Treasury intends to issue $15bn in international bonds, with some of this potentially replaced by loans from institutions like the BRICS New Development Bank.
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