The South African government has set a series of infrastructure projects to be implemented over the coming years. The plan, valued at about $135 billion, is to make the economy more resilient, especially after the pandemic period that has deeply disrupted the global economy.
This a multiphase program that focuses, in phase I, on 62 priority projects. According to the Public Work Minister Patricia de Lille, the country is short of $8.4 billion to run this first phase and plans to raise the amount through green bonds. The government traditionally finances most infrastructure with domestic resources, but the state coffers are empty. A situation that is putting pressure on most sectors, from energy to housing and telecoms.
“It’s not that the private sector doesn’t want to invest in infrastructure projects. The problem is that generally speaking, this infrastructure is scattered all over the place. Local authorities want to lead projects, provincial authorities want to lead projects, and ministries also want to lead projects, but there is no coordination,” Leon Campher, head of the Association for Savings and Investment South Africa (ASISA), told Bloomberg.
However, according to the expert, these different institutions do not have the skills required to properly evaluate a project and raise funds to finance it. This is one of the reasons the Minister of Public Works has started negotiations with the Johannesburg Stock Exchange to set up a national program to issue green bonds by the end of the year.
The market’s appetite for green bonds is growing. Egypt has recently raised $750 million through this instrument for a forecast of $500 million and subscription orders that have reached $3.2 billion.
So far, South Africa has issued R9.3 billion of green bonds on its national stock exchange.