Treasury raises R11.8bn in debut infrastructure bond

The National Treasury raised R11.8bn through South Africa’s first Infrastructure and Development Finance Bond, which will help to pay for national priority projects like water systems, hospitals and rail lines.

The Treasury said on Tuesday that the country’s first auction of its kind drew strong demand from investors, pulling in more than R26bn in bids, resulting in a 2.2-times oversubscription.

The bond auction is part of a broader budget plan to allocate over R1-trillion to public infrastructure over the next three years. These reforms seek to unlock more sustainable economic growth by investing in roads, water systems, schools, hospitals and other critical infrastructure.

In its first outing, the bond was issued in two tranches: a 10-year note raised R6.996bn at an interest rate of 8.6%; and a 15-year note raised R4.799bn at an interest rate of 9.13%. The Treasury said the pricing was aligned with current market rates.

“The auction cleared flat to the existing government bond curve,” the Treasury said in response to Business Day’s query.

It said the main participants in the bond were local investors, particularly the pension funds.

“There was very limited direct interest from offshore accounts. While some international investors monitored the transaction, participation in the auction itself was minimal,” the Treasury said.

Unlike traditional bonds, which fund a wide range of government expenses, the proceeds from this new bond are ring-fenced exclusively for infrastructure projects approved under the budget facility for infrastructure (BFI). The BFI is a funding programme within the national budget process that supports large, high-impact public infrastructure projects. It applies a rigorous screening process to assess eligibility for public funding.

To make the BFI more responsive, the Treasury recently expanded it to run four bid windows a year, up from just one, giving government departments, municipalities, provinces and state-owned companies more opportunities to request funding. These entities can apply for part-funding through the BFI, which can then be used to attract additional funding from the private sector.

The Treasury said this change is meant to improve both the quality and scale of the infrastructure pipeline, while embedding private sector participation in infrastructure delivery.

Reuters previously reported that infrastructure bonds were becoming increasingly popular tools for African governments to raise money, with Kenya having already sold such notes and Uganda considering an issue.

Samir Gadio, head of Africa strategy at Standard Chartered, told the news agency that these bonds may appeal to investors looking to diversify their portfolios, especially if they have infrastructure or sustainability requirements as part of their mandate. But they could be less liquid than regular South African government bonds, he said.

Update: December 11 2025

This story has been updated with extra comments from the Treasury.