News24
03 May 2021, 23:42 GMT+10
For the second time in more than a month, the South African government cut the size of its bonds on auction.
This is thanks to better-than-expected tax income, which means it doesn't have to rely as much on new debt as was previously expected.
On Monday, National Treasury announced that it will reduce its weekly auction of fixed-rate government bonds by R900 million - from R4.8 billion to R3.9 billion, starting from next week. It will continue to auction R1.2 billion in inflation-linked bonds.
At the end of March, government also substantially reduced its bonds on auction.
In a statement, Treasury said that the preliminary numbers for the past year showed a "gross borrowing requirement that is lower than the revised budget".
This is thanks to tax collections being higher than expected. While the pandemic, as well as sales bans on alcohol and cigarettes, hit South Africa's tax income, large windfalls in mining royalties helped to bolster government income. In the end, SARS collected "only" 10% less in tax in the past year than in 2019 - against government's previous forecast that it would be 18% less.
The stronger-than-expected tax income means that while South Africa's debt has ballooned during the pandemic - gross borrowing increased from R433 billion to R670 billion, with a fifth of all tax income now paid to its creditors - government does not need to issue as many bonds as previously expected.
Bonds are in effect IOUs, which pay regular interest payments. The full amount is paid back after a specific number of years.
"Revenue numbers have been looking better than expected but we did not expect it this soon," says Nishan Maharaj, head of fixed interest investment at Coronation Fund Managers of the decision to reduce the bond size for the second time since end-March. "It is encouraging that Treasury is using any revenue overrun or underspending to reduce the borrowing requirement rather than spend more."
Given the solid interest rates offered by South African government bonds, there are usually strong demand for local bonds at the weekly auctions.
But recently, demand has been under pressure amid soaring yields on US government bonds - making local bonds less appealing.
Get a daily dose of Australian Herald news through our daily email, its complimentary and keeps you fully up to date with world and business news as well.
Publish news of your business, community or sports group, personnel appointments, major event and more by submitting a news release to Australian Herald.
More InformationWASHINGTON, DC - A coalition of 29 U.S. senators, spanning both parties, introduced a resolution on Thursday calling on the Trump administration...
For decades, the US Agency for International Development (USAID) has been vital in combating HIV across the Asia–Pacific region, where...
MIAMI, Florida: Ken Griffin, the CEO of Citadel and a billionaire investor announced this week he would loan his rare first-edition...
GAZA - Israel Air Force pilots have heavily bombarded Gaza this week, killing hundreds and severely wounding hundreds more. The...
DOHA, Qatar: Boeing secured its largest widebody aircraft deal this week, as Qatar Airways placed firm orders for 160 jets with options...
NEW YORK CITY, New York: Goldman Sachs has agreed to pay a US$1.45 million civil penalty to resolve allegations from the Financial...
STOCKHOLM, Sweden: Sweden plans to propose that the European Union join the Pacific Rim trading bloc, the CPTPP, aiming to create the...
Washington [US], May 18 (ANI): Google has rolled out a significant update for Chrome on Android, allowing users to zoom in on text...
Swathes of South Australia, Victoria, Tasmania and Western Australia are in the grip of drought as they experience some of the lowest...
(250518) -- SHANGHAI, May 18, 2025 (Xinhua) -- Max Studer of Switzerland celebrates after the men's elite division of 2025 Yangtze...
New Delhi [India], May 18 (ANI): Former Australia captain Aaron Finch opined that Kolkata Knight Riders (KKR) have 'only themselves...
New Delhi [India], May 18 (ANI): Shreyas Iyer's move to Punjab Kings (PBKS) has proven to be one of the standout stories of the Indian...