South Africa is targeting a debut sovereign green bond as soon as this fiscal year to help raise the R3.7-trillion needed to mitigate the effect of greenhouse gas emissions over the next decade.
“Aspirationally, we would like to issue something within this fiscal year, so we’ve got from now until March 2027,” Wanga Cibi, chief director for liability management at the National Treasury, said in an interview. “If not, definitely in the 2027-28 fiscal year.”
The National Treasury is working to identify eligible projects that will be funded by the inaugural bond, after unveiling its guidelines for sustainable-finance instruments in May, Cibi said. A final decision on the amount and timing of the debut green bond will be made within the framework of the mid-term budget statement, scheduled for October, and will also depend on market conditions, she said.
According to the sustainable-finance framework, funds will be channelled into the nation’s climate transition and infrastructure pipeline, and will fund projects that could include hydrogen manufacturing, hydropower, geothermal electricity and bioenergy.
Money may also be raised for electricity transmission, water security, distribution networks for renewable and low-carbon gases, and the development of energy-efficient technologies for industries and households. Further, the government will use the financing to reskill workers and fund employment programs for coal-sector workers, expand access to public healthcare and education, and support low-income municipal housing developments.
Meeting South Africa’s environmental targets under international accords including the Paris Agreement on climate change will cost about R250-billion for implementation and R3.47-trillion for mitigation strategies between 2026 and 2035, the framework states. That’s an average of R372-billion a year. The country aims to raise about R160-billion a year from international climate-finance institutions by 2030, with the remainder coming from private-sector lenders and spending.
To reassure investors, and meet international standards, the framework includes rigorous governance parameters for debt issuance, and links financing directly to national priorities. The state is banking on the ESG bonds to attract a new set of investors as part of a broader effort to diversify debt and reduce overall borrowing costs, Cibi said.
“We can opt to do either a domestic or even a foreign euro- or dollar-denominated issue, which will attract an even bigger base of investors, so I really think it is quite ambitious,” she said. The government aims to raise as much as $8-billion annually by 2030 in public, private, domestic and international capital, she said.
Green bonds often achieve better pricing than standard government debt, according to Nigel Beck, head of sustainable finance and ESG at Rand Merchant Bank, which helped draw up the government’s ESG issuance framework.
“What we have seen on a number of corporate bonds that we’ve worked on with clients, generally sustainable issuances — that is, green and social issues — will price better,” Beck said. “There are significant pools of capital, locally and especially globally in hard currency, that are looking for sustainable finance instruments and you’re able to crowd in those pools of capital. That increases bond over-subscription and generally drives the pricing down.”
