South Africa


Policy Watch

South African Monetary Policy Statement


South African Reserve Bank increases its key rate by 25 bp to 6%.

South Africa Monetary Policy Statement


The SARB kept the repurchase rate unchanged at 5.75%.

South African Monetary Policy Statement


South Africa Reserve Bank keeps it key rate unchanged, at 5.75%.

Debt vs GDP / Bonds vs bills

All Data - South Africa

Year 2012 2013 2014 2015 2016 2017
GDP (billions US$) 397.35 366.06 333.01 - - -
Total Outstanding Amount (Billion US$) 147.92 137.60 - - - -
Bonds 126.47 116.92 - - - -
Bills 21.46 20.68 - - - -
Outstanding Amount/GDP (%) 37.23% 37.59% 0.00% - - -

Country Summary

South Africa’s financial sector is the largest and most advanced in Africa. It combines a highly developed economic infrastructure and an emerging market economy. The sector is also highly diversified with the presence of pension firms, insurance businesses, commercial banks, investments banks and managed funds. The local stock exchange, the Johannesburg Stock Exchange (“JSE”), is the largest in Africa with a market capitalization of USD 1.007 trillion in May 2014.

The banking sector is very concentrated and five groups, Standard Bank, ABSA (Barclays), First Rand, Nedbank and Investec Ltd. dominate the sector. It is profitable, well capitalized and regulated; the implementation of the Basel II guidelines helped South African banks survive the 2008 financial crisis. In June 2014, the capital adequacy ratio of the South African banking sector was 14.6%, above the 10% regulatory requirement.

The capital markets of South Africa are the most developed on the continent. At the end of May 2014, there were 326 companies listed on the JSE. The Bond Exchange of South Africa (“BESA”) is the only one of its kind in the continent. Currently, no other African countries have developed an exchange exclusively for debt securities (bond futures, bond options and forward bonds are traded). The BESA is self-regulated; in June 22nd 2009, it became a wholly-owned subsidiary of the JSE.

The debt market in South Africa is dominated by government securities. The nominal value of government securities accounted for 61% of the total value of debt listed on the JSE in March 2014.

The total value of the government debt portfolio at the end of March 2014 was ZAR 1.1 trillion. Net issuance by the government was R149.8 billion, mainly fixed-rate securities (68%).

From its origins in the 1970s, the bond market has developed through multiple phases. In the 1990s, the government’s efforts were on implementing an appropriate infrastructure; between 1990 and 1999, the debt market moved towards establishing a liquidity and cash management structure. The third and current phase is about the establishment of a proper framework for asset and liability management.

The Financial Markets Bill is a key piece of new legislation which seeks to update the Securities Services Act of 2004 by taking on board the latest developments in international regulation and the regulatory framework (regarding unlisted securities, derivatives and insider trading). The South African Reserve Bank (SARB) supervises the banking sector, while the Financial Services Board (FSB) governs the non-bank financial services industry (insurance companies, pension funds, unit trusts, participation bond schemes, portfolio management, and the financial markets). The Capital Markets Department of the FSB regulates the Capital Market activities in South Africa.

Monetary policy & Public debt

The first objective of the South African Reserve Bank’s (SARB) is to achieve and maintain price stability.  It uses an inflation target bracket at 3-6% (headline consumer price index) to conduct its monetary policy.

The Financial Markets Department of the SARB is responsible for implementing the monetary policy. The repo rate is used as the key policy instrument to conduct the monetary strategy; every second month, it is reviewed by the Monetary Policy Committee (MPC). Liquidity is managed in the financial system through weekly auctions of repurchase agreements.

Effective 2012, the Ministry of Finance requested the NT to publish an annual Debt Management Report. This document summarizes key strategies and statistics of South Africa domestic debt. The primary objective of this strategy is to reduce the borrowing costs of the government and enable better access to domestic and international markets; the secondary objectives were to deepen the bond market and diversify the offering of borrowing instruments.

Market Structure

Market participants


Since 2006, Central government and municipalities have been the dominant issuers. The Reserve Bank is the issuing agent of the NT which is in turn the borrowing agent of the government.

Investor base

Banks, pension funds, insurance companies and fund management companies form the major investors in the market of government securities.

Financial institutions are the major investors in Treasury bills. Four of the largest banks count for a large share of the investment. Shareholdings as of March 31st, 2013 were respectively: Absa Bank holding (28%), First Rand Bank (18%), Standard Bank (17%), Investec (11%), Nedbank (10%), and other (15%).

Foreign investors dominate the Treasury bonds market; they represented 38% of the investors in March 31st, 2013. This is followed by the pension funds (29%), monetary institutions (14%) and insurers (9%). Other financial institutions represented (7%) of the investors.

Other Intermediaries

The main intermediaries in the secondary market are brokers, dealers, inter-dealer brokers, market makers and primary dealers (Debt Management Report, 2012-13).

The Reserve Bank requires Primary Dealers (PDs) to participate actively in the debt market. The PDs must submit at least 14.5% of the amount offered at each bond auction (Debt Management Report, 2012-13).

Instruments issued

Instruments issued by the National Treasury

Treasury bills: Maturities available are 91-, 182-, 273- and 364-day. Auctions are conducted every Friday.

Treasury bonds: The National Treasury (NT) auctions two types of long-term securities: fixed-rate bonds and inflation-linked bonds. Fixed-rated bond are auctioned every Tuesday and Inflation-linked bonds are auctioned on Friday. Maturities range up to 35 years. As part of the strategy to minimize risks, the NT has focused its issuances at the long-end of the curve.

RSA Government retail savings bonds:  The South African government runs a bond sale program for small investors, entailing minimum investment amount of ZAR 1,000 (up to a maximum of ZAR 5 million). The securities offered are identical to the regular bond program, i.e. fixed-rate and inflation-linked bonds. The maturities differ; for fixed-rate bonds, tenors are 2, 3 and 5-years and for inflation-linked bonds 3, 5 and 10-years. The RSA program is only open to citizens and residents.

Instruments issued by municipalities, state-owned companies and para-statals

Municipalities that issue bonds are among the largest cities in South Africa. In addition to conducting a regular bond sale program, South African Municipalities also run a retail savings bonds scheme. The City of Johannesburg was the first to inaugurate this scheme with its Jozibonds. The securities were offered exclusively to citizens and permanent residents. The securities had tenors of 2-, 3- and 5-years, were listed on the JSE and required investment of at least ZAR 1,000. The Jozibonds share the same “commission-free” characteristics as their bigger sisters, RSA bonds.

Average-time to maturity, yield-to-maturity

In 2013, the average term-to-maturity of the South African debt portfolio (excluding t-bills) was 12 years. The modified duration (excluding t-bills) was 7.6 years and the yield-to-maturity was 5.78%.

Primary and Secondary Market

Primary Market

Auction process of Treasury bills

Treasury bills are offered by tender invitation or private placement. The NT may issue through another means if necessary.

Only primary dealers designated by the NT can participate.

The minimum bidding amount is ZAR 100,000; additional investments are in increments of ZAR 10,000. The allocation of bids is made in descending order of prices.

Auction results are announced on newswire and posted on the Reserve Bank website.

Auction process of Treasury Bonds

Auctions of fixed-rated bonds are restricted to eligible banks (that show at least ZAR 1 billion of Tier Capital I). Bids are submitted on a yield basis and allotment is 100% of the amount offered.

In auctions of inflation-linked bonds, there are no primary dealers. Any member of the JSE can participate, provided it signed an agreement with the Reserve Bank. In inflation-linked bond auctions, the allocation may be less than the amount offered.

Auction results for fixed-rate and inflation-linked bonds are published on the Reserve Bank website.

Switch Auctions

Switch auctions are conducted on a multiple-yield basis (American-type auction). Securities are sold by tender offers.

Only primary dealers are allowed to participate.

Minimum bid amounts are ZAR 10 million. Any additional investments are in increments of ZAR 5 million.

Secondary Market

OTC vs. Exchange listed

Trading volumes on government securities was R22.4 trillion in 2013.

Clients can trade on-exchange (Central Order Book) or away from the market (Report only).

Trading system

Since 2012, the JSE uses the trading system of the London Stock Exchange, the Millennium system.

The Money Market System in South Africa is an internet-based auction system. Members of the FSB, the JSE and listed companies are authorized to use this system. In the event investors cannot access to this system, bids can be submitted by telephone; a confirmation will later be sent via Swift.

Clearing, Settlement and custody

Strate is the Central Securities Depository (CSD); it handles the electronic settlement of fixed-income securities and other financial instruments (equities, derivatives, etc). Strate also offers rolling, contractual, guaranteed settlement through electronic delivery-versus-payment on net cash, net securities basis.

Settlement of bonds is effected in accordance with the following principles :

  • Between the scrip root and the cash root;
  • Trade by trade;
  • Tolling and contractual; and
  • On a net basis per trading member, per settlement date, per listed bond whereby individual transactions are consolidated and offset into net amounts of bonds and funds for settlement by Strate.

For fixed income securities, particularly bonds, settlement of on-market trades is fully automated, with all instructions being issued via SWIFT messages. However, strict deadlines are imposed for the receipt of the relevant instructions.

Off-market trading is not allowed, except for international trades.

Investor Protection

As the regulator of the Central Securities Depository Participants (CSDPs), Strate is responsible for ensuring the certainty of market transactions. It also has a statutory and contractual duty to protect investor records in the electronic environment. This reassures investors that all business processes associated with electronic settlement are properly regulated and that inefficiencies and risks are minimized.

The South African Multiple Option System (SAMOS) provides additional assurance as it ensures the simultaneity of transaction in both sides (buyer and seller). The transfer of ownership takes place immediately upon settlement, mitigating principal risk.

Guide to Buying Bonds

Procedures for market participation

Procedures for market participation for residents

Primary issues of treasury bills and fixed-rated bonds are restricted to primary dealers and selected banks. Participation to auctions of inflation-linked bonds is opened to members of the Johannesburg Stock Exchange(JSE).

Retail savings bonds can be purchased online, by telephone, with a broker of the BESA, in person at the National Treasury (NT) (Asset and Liability Management Division) and at any Post office. Rates are advertised as being competitive, with no commission or agency fees. The amount that can be invested ranges between ZAR 1,000 and ZAR 5 million for both fixed-rate and inflation-linked bonds.

Procedures for market participation for non-residents

Bondholders who are not resident in the Common Monetary Area (South Africa, Lesotho, Swaziland and Namibia) will be issued a certificate endorsed as ‘non-resident’.

A non-resident must instruct their nominated Participant or Authorized dealer as to how funds due to them from the Bonds are to be dealt with. These funds can be remitted abroad granted that the relevant Bonds are acquired with foreign currency introduced into South Africa.

Settlement cycle

The settlement cycle for on-market bonds stands at T+3 and that for off-market bonds at T+1, T+2, T+3, with the possibility of trades being rolled for up to three days to a T+6 maximum. Settlement is handled by Strate, the Central and Securities Depository in South Africa.


There is no withholding tax on interest income for both residents and non-residents. However, effective March 1st, 2014, a 15% tax rate will be applicable to interest earned by foreign investors.

Capital gains are taxed at the normal income tax rate on 50% of the gains. However, gains on the sale of substantial foreign shareholdings are exempt if certain conditions are satisfied.

Market restrictions

Openness to international investors 

Foreign participation is authorized in the government securities market. Municipal bonds and RSA retail bonds are restricted to permanent residents and citizens.

Virtually all business sectors in South Africa are open to foreign investors. Government approval is not required to invest, and there are few restrictions on the form or extent of foreign investment. 

Capital controls 

The Exchange controls have been replaced with prudential limits for institutional investors. Non-residents are largely exempt from exchange controls. Restrictions are in place for South African domiciled companies and citizens. Most of the restrictions on outward foreign direct investments have been lifted, except for restrictions on banks where it is set to a maximum of 40% of assets.

With regard to individuals, a maximum of ZAR 4 million may be invested offshore and the annual discretionary amount has been increased to ZAR 750 000. The major limitations are on institutional funds, which can hold up to a maximum of 20% of assets in foreign investments.

Restriction on foreign exchange and profit repatriation

The South African Reserve Bank's (SARB) Exchange Control Department administers the foreign exchange policy. An authorized foreign exchange dealer, normally one of the large commercial banks, must handle international commercial transactions and report every purchase of foreign exchange that is received by South African residents or companies. Generally, there are only limited delays in the conversion and transfer of funds.

Non-residents may purchase local securities without restriction. Non-residents may freely transfer capital into and out of South Africa. These transactions must be reported to the authorities. Foreign investors should ensure that an authorized dealer endorses their share certificates as "non-resident" to facilitate the repatriation of capital and profits. Foreign investors should also maintain an accurate record of all investments.

Credit rating

The three rating agencies, S&P, Moody’s, Fitch gave South African sovereign bonds ratings of BBB, Baa1 and BBB respectively

Rating Agency

Current Rating






November 2014




June 2014

Standard & Poor’    



June 2014

List of primary dealers

The primary dealers authorized by the NT are: