Investors pile into SA’s first infrastructure bond

South Africa raised R11.8 billion in its first infrastructure-bond sale, drawing bids for more than twice the amount sought and boosting its construction-led growth plans.

Africa’s largest economy sold R7 billion of 10-year debt at a yield of 8.575% and R4.8 billion of 15-year notes at 9.13%, the National Treasury said in a statement on Tuesday. Bids for the securities exceeded R26 billion, it said.

The fundraising forms part of President Cyril Ramaphosa’s drive to lift growth by overhauling ports, rail, power and water infrastructure, with the aim of raising the economy’s expansion rate to 3.5% by 2030 from less than 1% over the past decade. That effort is underpinned by a shift toward investment in South Africa’s state budget, with capital spending now the fastest-growing expenditure item at 7.5% a year.

Read: Government to launch R15bn infrastructure bond to fund projects

The funds will flow into the government’s reworked Budget Facility for Infrastructure, which screens and finances large-scale construction projects.

Construction workers build a wall at the Goodenough Abstraction Works project on the Ukhomazi River in KwaZulu-Natal, South Africa, on Thursday, 7 November 2024.

“The proceeds from the Infrastructure and Development Finance Bond will be used exclusively” for BFI-linked investments, and such notes will be tapped in future auctions to support additional projects, the Treasury said.

The strong investor appetite reflects improving sentiment toward South Africa, which brightened after Treasury unveiled better-than-forecast revenue collection and a reaffirmation of its fiscal-consolidation stance in its budget update last month. Confidence has been further supported by the virtual end to scheduled power cuts since early last year and efforts by the nation’s government to tackle the logistical bottlenecks that have hampered exports.

S&P Global Ratings in November acknowledged the improving economic metrics with its first upgrade to the country’s credit assessment since 2005. And investors last week piled into a $3.5 billion South African dollar-bond sale that attracted demand for almost four times the amount on offer.

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