The National Treasury has successfully raised nearly R11.8-billion through South Africa’s inaugural Infrastructure and Development Finance Bond, marking a major step in financing priority public infrastructure projects.

It reported on December 9 that the auction had attracted strong market interest, with bids exceeding R26-billion and achieving a 2.2-times subscription rate.

The bond issuance forms part of a series of reforms, first outlined in the 2024 Medium Term Budget Policy Statement, aimed at boosting investment in the infrastructure required to drive higher economic growth and improve service delivery.

The proceeds from the bond will be used exclusively to finance projects under the Government’s Budget Facility for Infrastructure (BFI).

The BFI is a mechanism within the budget process that supports the execution of national priority infrastructure projects. Projects are screened to determine their eligibility for public funding.

Government this year reconfigured the BFI to run four bid windows a year instead of a single window. The four bid windows enable public institutions, including national departments, provinces, municipalities and State-owned enterprises to request funding for part of the cost of a project.

This funding forms the basis to attract additional private investment, allowing the government to improve the quality and scale of the public infrastructure pipeline and embed private-sector participation in project delivery.

Treasury said the inaugural auction size was allocated in line with current market rates to optimise the cost of government borrowing.

The total issuance amount was split across 10- and 15-year maturities. The ten-year bond, RI2036, raised nearly R7-billion at an interest rate of 8.575%, while the 15-year bond, RI2041, raised nearly R4.8-billion at an interest rate of 9.13%.

Treasury indicated that, as part of its funding strategy, it plans to tap these bonds in future auctions to finance further BFI-aligned infrastructure projects.

These reforms include the development of long-term financing instruments to attract investment for priority public infrastructure.