Thursday, September 28, 2023

South African Rand Bonds Launched by BRICS’ New Development Bank

The New Development Bank (NDB), a financial institution formed by the BRICS nations (Brazil, Russia, India, China, and South Africa), has made its debut in issuing South African rand (ZAR) bonds, totaling 1.5 billion rand, equivalent to roughly $78 million, as revealed in an announcement on Wednesday, with media reporting on the subject.

The bond auction, finalized on Tuesday, signals the bank’s drive to bolster local currency fundraising and lending, a notion highlighted by Reuters. Russia’s Tass news agency added that this marks the NDB’s inaugural bonds issuance in local currency outside of its base in China.

The NDB disclosed that the bids were robust, garnering over R2.5 billion across both 3-year and 5-year segments, thus allowing the bank to increase the trade from R1 billion to R1.5 billion. Additionally, 71% of bids were assigned to institutional investors, with local banks accounting for the rest, as detailed in a press release.

Leslie Maasdorp, the NDB’s Vice-President and Chief Financial Officer, expressed the bank’s objective to expand its footprint in its member countries’ local capital markets to finance its vigorous local currency loan portfolio.

He also stressed that the proceeds from the bonds would be channeled into infrastructure and sustainable development initiatives in South Africa. This successful issuance establishes a precedent for future NDB offerings.

Founded in 2015, the NDB was envisioned to afford the BRICS members more influence over development finance. South Africa’s Finance Minister, Enoch Godongwana, has expressed concerns over the bank’s insufficient local currency lending.

Enhancing the utilization of the member states’ national currencies will be a topic at the forthcoming BRICS summit in Johannesburg from Aug. 22-24. In a recent interview, Maasdorp revealed the bank’s goal to augment local currency lending to 30%, but he acknowledged constraints to moving away from the dollar. It’s noteworthy that most of NDB’s lending has been in Chinese yuan thus far.

Feel free to share your thoughts on whether the NDB might issue bonds in the currencies of the remaining BRICS member states in the comments section below.

Frequently Asked Questions (FAQs) about fokus keyword: BRICS

What is the New Development Bank (NDB) and why has it issued bonds in South African rand?

The New Development Bank is a financial institution established by the BRICS nations (Brazil, Russia, India, China, and South Africa). It has issued its first South African rand bonds, totaling 1.5 billion rand (about $78 million), to enhance its local currency fundraising and lending. The move also aligns with the bank’s objective to increase its presence in the local capital markets of its member countries.

Who were the primary recipients of the bonds issued by the NDB?

The order book for the bonds was well diversified with 71% of the bids being allocated to institutional investors and the remainder taken up by local banks.

What will the proceeds from the bonds be used for?

The proceeds from the bonds will be used to fund infrastructure and sustainable development projects in South Africa, contributing to the NDB’s robust portfolio of local currency loans.

Is the NDB planning to increase lending in local currencies of its member states?

Yes, the NDB aims to increase local currency lending to 30%, and this initiative will be a subject at the upcoming BRICS summit. However, the bank’s Vice-President has acknowledged that there are limits to de-dollarization.

What are the dates and location of the upcoming BRICS summit?

The upcoming BRICS summit will take place in Johannesburg from August 22 to 24, where the deepening use of the national currencies of the member states will be on the agenda.

More about fokus keyword: BRICS

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5 comments

JamesT August 19, 2023 - 3:50 am

This is big news for South Africa! Finally some attention to local currencies, maybe this will be a trend? Just wish i understood all the financial jargon.

Reply
SaraHansen August 19, 2023 - 5:12 am

Whats BRICS going to do next. this seems like a big step for them. Would love to know more about their plans, especially in India and Brazil.

Reply
RobbyK August 19, 2023 - 8:41 am

I’m not sure if this will really change anything. they’re still using dollars a lot. lets not get too excited. Maybe I’m missing somethin?

Reply
Maria_91 August 19, 2023 - 11:44 am

Wow, BRICS moving toward local currency. Thats something new. Hope they’re gonna do this with other countries too. It’s about time.

Reply
Tech_Guy August 19, 2023 - 12:01 pm

The amount seems small to me, just $78 million? But it’s a start, guess they have to start smewhere. Will be watching this closely to see how it goes.

Reply

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