Rikus Grobler | Oct 18, 2017 | 0
Debut ZAR bond oversubscribed
The South African capital market has shown a huge appetite for Namibia’s debt after the R850 million 10-year debut bond was oversubscribed by a factor of two on its listing on Wednesday.
The bond, issued as part of the R3 billion Medium Term Note programme, is the first-ever ZAR bond transaction by a sovereign (other than by the South African national treasury) on the Johannesburg Securities Exchange. It was priced at 8.26%. Nampower also has a listed bond on the JSE but following the experience gained with the listing of the first tranche of the Medium Term Note Programme, this bond will probably have to be redeemed and re-issued.
In a statement issued after the successful placement of the ZAR Bond, Finance Minister Saara Kuugongelwa-Amadhila said the South African market have held a long standing appeal for issuers outside of South Africa due to the favourable liquidity conditions and well developed capital markets.
The minister said access to the South African capital and money markets for the Common Monetary Area (CMA) member countries is already provided for in the CMA Multilateral Agreement.
She said: “The CMA governments and private entities are treated as local issuers in the South African market and the issued instruments are classified as domestic in the South African market. As a domestic issuer, the Republic of Namibia is therefore subject to the same relevant financial laws and policies applicable to the national treasury when it issued its inaugural R850 million in the South African market.”
By listing the ZAR Bond on the South African market, Kuugongelwa-Amadhila added that the government was diversifying its funding sources and attracting the South African investors who hitherto have not taken part in the Namibian domestic debt markets.
“Having alternative funding sources becomes even more critical given the limited access to concessional funding following Namibia ‘s classification as an upper middle income country,” the minister further said.
Both the South African and the Namibian governments strongly believe that this initiative will have a far-reaching positive effect to support regional economic development and promote more regional integration in the CMA.
The transaction was facilitated by a consortium of Namibian and South African financial institutions like Absa Capital, Namibia Equity Brokers, Rand Merchant Bank and RMB Namibia who were all co-lead arrangers of the transaction.
The ZAR bond in South Africa follows closely in the footsteps of Namibia’s award winning international US Dollar denominated Eurobond issued in London in 2011, in which Namibia raised US$500 million in 10-year bonds marking the country’s first approach in the international capital markets.
The idea to launch a note programme in the South African capital market was conceptionalised late last year by a technical team at the Bank of Namibia. The work to prepare the programme for issuance only started in May this year and was completed in record time by a handful of bookbuilders assisted by South African and Namibian lawyers, as well as the Bank of Namibia technical team. The note programme had to be approved by the Ministry of Finance, who acts as the official issuer.