South Africa is considering selling green bonds to drive private investment in its projects over the next decade. The Green bonds will help the country counter adverse economic effects caused by the pandemic, looking to finance projects worth over 1.5 Trillion Rand ($86 billion) over the next ten years.
South Africa’s President Cyril Ramaphosa will officially announce the green bond program on Tuesday, revealing commitments by private investors and international financial institutions.
While the country is in dire need of infrastructure, its rising debt and lack of funds limit the state from financing infrastructure projects. The Treasury expects the country’s debt to GDP ratio to exceed 100% by 2025. Similarly, state companies cannot fill the infrastructure gap given their mounting debt.
The country is, therefore, wooing private investors who have more funding capacity to fund infrastructure projects. A Bloomberg report shows that privately-held mutual funds hold excesses of 2.5 trillion rands compared to 2.1 trillion rands held by the Public Investment Corp.
According to the country’s head of the Presidency’s Investment and Infrastructure Kgosientsho Ramokgopa, the green bonds will make it easier for private investors to participate as they are easy to buy and sell. Further, he says that the government could use infrastructure funds to invest in critical projects, reducing investors’ risk.