BRICS New Development Bank uses its secure rating to launch rand bonds

The BRICS New Development Bank (NDB) will be using its strong credit rating to launch a rand bond programme which will enable it to provide funding South Africa’s public entities. NDB Africa head, Monale Ratsoma said on an interview last week, that this could be on-lent at a competitive rate.

The BRICS Bank has prolonged a $300 line of credit to the Development Bank of Southern Africa (DBSA), this will be the third loan with a SA public entity.

The DBSA loan according to Spokesperson, Sebolelo Matsotso the loan will be drawn when mandatory.  According to Matsotso, the loan will be used for renewable energy projects and other projects that will aid in reducing the greenhouse gases being released in SA.

Like the BRICS Bank, the DBSA is an infrastructure bank and has lent money to the country’s state-owned entities such as Eskom.

Matsotso’s intention according to Business day was to use the NDB’s strong credit rating at a lower cost than what can be done by South African public entities. Most SA public entities hold the same or lower rating that South African sovereign. Only Moody’s still rates South Africa’s sovereign debt as investment grade at Baa3 while Fitch and S&P have it in noninvestment territory, reports Business day.

“We hope to utilise the rating strength of the NDB to raise money in a more cost-effective way. The DBSA should then be able to competitively on-lend to its clients. We also want to use the rating strength to issue a rand bond. Regulatory processes with the JSE and SA Reserve Bank towards that fairly advanced,” says the spokesperson.

The size of the bond programme is to depend on the need for it in the market, which is still researched.


Source: Business Day

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