NATIONAL ASSEMBLY : 11th June 2008
 

Madame Speaker, 

The South African government and a variety of public enterprises have embarked on a massive infrastructure spending programme to enable our country to achieve higher rates of growth and to be in a position to meet the challenges of tomorrow head-on.

Obviously, someone has to pay the hundreds of billions of Rand needed for this expansion programme. Some of the costs will be funded directly from the fiscus via tax revenue and some of the costs will be borne by companies such as Transnet and Eskom, by raising finance from their balance sheet in the equity markets.

Another funding avenue for government is to issue bonds. These are essentially debt instruments that guarantee payment of an original investment plus interest by a future date.

Currently, South Africa is running a budget surplus and no new government bonds have been issued for a while, meaning that there is a shortage in the market. However, the infrastructure programme may necessitate new government bonds being issued in the short-term.

It is therefore of the greatest concern to the IFP that existing government bonds are taking a beating at the moment due to the weak Rand, high oil prices and the forthcoming MPC decision on interest rates. The yields for the R153, R157 and R186 bonds were all up in trading on Monday, while last week foreigners were net sellers of more than a billion Rand in local bonds.

Should this trend continue, it means that government will have to pay out much higher amounts when these bonds mature placing pressure on national revenue and spending capacity.

Thank you