Credit Insights: South Africa’s First Infrastructure Bond Sees Strong Demand and Signals a Clear Pathway for National Development Funding

Infrastructure debt issuance in Africa

South Africa is not alone. Across Africa, several countries have been moving toward dedicated infrastructure bonds, and South Africa’s new issuance fits firmly into this growing trend. Kenya has been one of the most active, regularly issuing large infrastructure bonds such as the 2024 KES 70 billion infrastructure bond (roughly ZAR 9 billion), that are consistently well subscribed by local banks, pension funds and retail investors. Nigeria has also expanded its use of infrastructure linked debt, supported by foreign credit guarantee structures that make long-dated project bonds more attractive to institutional investors. It is clear that there has been strong demand for infrastructure instruments that are well structured, transparent, and aligned with national development priorities, as well as African markets being willing and able to absorb meaningful size.

South Africa’s successful issuance now positions it firmly in this space. The strong demand demonstrates that investors are ready to support targeted, high impact funding tools, with transparent objectives and governance. This creates an important foundation for scaling future programmes.

What is the SA infrastructure bond, and why it matters

South Africa has entered the market with a large Infrastructure Bond issuance, launching with a sizeable R11.8 billion transaction aimed at channelling long-term capital into energy, water, transport, and social infrastructure. Despite not meeting the R15 billion target it can still be considered a successful issuance due to its large size, demand, and clearing price, which was in line with that of SA Government bonds. The national treasury has 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 scale of the deal is notable. It represents one of the largest dedicated infrastructure-linked raises in recent years in the South African public debt market, at a size that has taken domestic banks years to build through their sustainable bond issuances.

The ZAR denominated local currency issuance meant domestic investors could participate without taking on foreign exchange risk. Additionally, many South African institutional investors operate under mandates that favour or even require ZAR-denominated fixed-income assets. This is reflected in the bid results: 28% of bids came from domestic banks, while only 2.8% came from international institutions. Investor appetite was significant, with the auction attracting an orderbook more than two times oversubscribed, signalling strong confidence in treasury’s credit worthiness and a deepening pool of demand for long-dated, purpose-driven sovereign assets.

This issuance matters because it aligns directly with government’s renewed push to unblock infrastructure bottlenecks and accelerate delivery of essential projects aimed at achieving the goals set out by the National Development Plan (NDP). By creating a dedicated funding instrument, Treasury is signalling a shift toward clearer use of proceeds, better transparency, and more predictable capital allocation, factors that help investors rebuild trust in the state’s execution capacity and governance of funds.

How the proceeds will be used

The funds will be deployed through the Budget Facility for Infrastructure (BFI). The BFI is a specialised funding mechanism created by National Treasury to ensure that only high quality, well-prepared infrastructure projects receive long term government funding. It was introduced because too many public sector projects were poorly planned, went over budget, or stalled during implementation.

Eligible applicants such as government entities, municipalities, and PPPs, must submit detailed proposals demonstrating feasibility and impact. Instead of funding being allocated year by year, the BFI can grant secured, multi-year budget commitments for large projects (usually over R1 billion). This gives certainty and allows projects to be properly implemented.

The bond term sheets state that regular monitoring and reporting on fund deployment and project progress will be communicated.

An important precedent

The inaugural infrastructure bond issuance deserves to be seen as a major success for South Africa’s capital markets. The scale and quality of demand underscore a powerful vote of confidence in both the structure of the instrument and the country’s long-term development agenda. The level of oversubscription is a strong sign of domestic market interest, and it reflects the belief that a dedicated, transparent infrastructure bond is both a value generating tool and has merit in achieving positive outcomes for the country. It sets an important precedent for mobilising private and institutional capital at scale into dedicated infrastructure sovereign debt instruments.