The South African government issued a R20.4 billion sukuk domestically yesterday, its first Islamic bond issuance since a debut sukuk in 2014 that listed overseas.

The issuance was split into four tranches maturing between March 2029 and March 2036 and with profit rates of between 9.87% and 11.9%, according to auction results shared with Reuters by Standard Bank, one of the banks that arranged the deal.

The benchmark local sovereign bond maturing in 2030 currently has a yield of 10.1%.

South Africa's first sukuk, which matured in 2020, was dollar-denominated, but its domestic investors comprise a deep liquidity pool. Its finance ministry forecast in November that the country's debt-to-GDP ratio would peak higher than previously thought.

South Africa's latest sukuk, a senior unsecured sharia-compliant instrument that will launch on the JSE on November 29, was 1.74 times oversubscribed, with 10 out of 13 bids accepted, the auction results document showed. The country had planned to issue R20 billion.

South Africa has not issued an international bond since April 2022. Many emerging markets have been locked out of international bond markets for almost two years, as their yields shot up to prohibitively high levels when the US Federal Reserve hiked interest rates.

Egypt, which turned to the International Monetary Fund for support last year, issued a $1.5 billion (R276bn) sukuk on the London Stock Exchange in February, while the Philippines' finance minister said last month it would issue its maiden sukuk by the end of November.

REUTERS