The National Treasury is looking to tap institutional investors and multilateral institutions to supplement its foreign currency borrowing programme for the 2025/26 fiscal year, looking to raise billions of rand.
To this end, the Treasury has gone to market seeking proposals from primary dealers in SA government securities, internationally active arranging banks, multilateral institutions and financial outfits with capacity to fund at scale.
“Proposals should raise, on a stand-alone or combined basis, a minimum amount of $500m. If funding is offered in another hard currency, the counterparty must commit to swapping the proceeds into US dollars at closing,” it said in a regulatory filing, stressing it is seeking “innovative and cost-effective financing mechanisms” to meet its objectives.
The department said the funding initiative is to diversify the sovereign’s hard currency funding toolkit beyond a traditional Eurobond and to reduce execution risk and minimise the all-in cost of funds.
“The National Treasury will consider a range of instruments, including but not limited to: bilateral term loans; private placements of floating rate notes; repurchase agreements against sovereign collateral; cross-currency or total return swaps with funding legs in US dollars; and other structured note formats.”
The Treasury will look out for proposals that incorporate environmental, social and governance features.
The evaluation criteria put forward show that prominence will be given to whether the proposals are resilient to market shocks, including currency volatility and rate spikes. The overall costs of the funds will also be a key determinant, as well as “speed and certainty of execution” and compatibility with the sovereign’s maturity profile and debt service peaks.
The deadline for proposals is August 6, after which the Treasury will spend the rest of the month evaluating the bids. It needs to borrow about R590bn in the current fiscal year.
Business Day has previously reported that the government has over the past five years signed more than a dozen loans with concessional lenders such as the World Bank, the Brics bank and French and German development banks.
This is because these multilateral institutions offer finance at far cheaper rates and easier terms than those available on international capital markets.
The Treasury’s 2023/24 debt management report shows foreign currency issuance in the year was focused on concessional lending from multilateral development banks and bilateral agreements to meet its foreign currency commitments.
For the period under review, the government has raised about $2.4bn through concessional financing.
The department has several primary dealers on its panel, which constitutes banks that buy government bonds at weekly fixed-rate bond auctions. These include Absa, Citibank, Deutsche Bank, FirstRand, Goldman Sachs, Investec, JPMorgan Chase, Nedbank and Standard Bank.
These dealers are required to distribute government bonds, make markets and provide liquidity in the secondary market.
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