Question NW1172 to the Minister of Finance

Reply:

(a), Government’s gross borrowing requirement is financed through the issuance of domestic short and long-term loans, foreign currency long-term loans and the use of cash balances. Domestic short (Treasury bills) and long-term loans (bonds) are issued to market participants in the primary market (primary dealers and other financial institutions) through weekly auctions. The market participants buy these bonds on behalf of their clients which include pension funds, foreign investors, insurers, monetary institutions, other financial institutions, and individuals to name a few.

Gross loan debt has increased from R2.5 trillion in 2017/18 to R4.3 trillion in 2021/22. Government has therefore borrowed an additional R1.8 trillion from both domestic and international investors.

Table 1. Domestic and foreign loans for the period 2017/18 – 2021/22

Figure 1 shows the ownership distribution of domestic long-term loans. The share of domestic bonds held by foreign investors declined to a 10-year low of 28.2 per cent by December 2021. Although these investors remain the largest category of domestic bondholders, risk aversion is rising due to global and domestic events. Other financial institutions and pension funds increased their holdings from 17.6 per cent and 22.4 per cent in 2020 to 20.1 per cent and 23.5 per cent in 2021 respectively. South African banks have been holding significantly more government debt because of weak demand for private credit and relatively high interest rates on government debt.

Figure 1. Ownership distribution of domestic long-term loans

Foreign currency long-term loans are raised through the combination of marketable loans - raised in the international capital markets - these foreign bonds are mostly bought by foreign institutions and are traded on the secondary market on the Luxembourg exchange. Non-marketable loans - concessional financing - includes borrowing from multilateral development banks (MDBs) and International Financing Institutions (IFIs) such as the World Bank, new development bank, African development bank and the International Monetary fund

Some of the loans from multilateral development banks includes but not limited to the following, which can be found in Table 7.5 of the Budget Review 2022.

(b), Detailed information about outstanding bonds, redemption dates, redemption amounts, and coupon rates can be found on the National Treasury's investor website.

Retail investors who purchase directly from the National Treasury take up the remainder of the loans. They consist of both individuals and co-operatives registered with the Co-operatives Banks Development Agency (CBDA). The terms and conditions of retail bonds are available on the retail bonds website https://secure.rsaretailbonds.gov.za/Home.aspx. Additional information about issued loans can be found in the annual debt management report on http://investor.treasury.gov.za/Publications/Forms/AllItems.aspx.