Brics announces mooted rand-dominated bond market
22 Mar 2019 - by
The New Development Bank (NDP) is flexing some multi-lateral muscle after the investment arm of Brics announced that it should start issuing bonds in rand, thereby effectively freeing itself from dollar-dominated exchange volatility.
The registration process for such a bond programme was started last year and is currently in the final stages of regulatory approval.
The news is widely seen as ground-breaking for emerging markets, often held ransom by appreciating repayments when their currencies tank against the Greenback.
NDP CEO Leslie Maasdorp said the bank’s rand aspirations had been a long time coming and were in keeping with the ambition of Brics countries – Brazil, Russia, India, China and South Africa – to shake off the yoke of dollar domination.
Part of the NDP’s positional strength in this regard stems from a three billion yuan investment it has with the China Interbank Bond Market.
The liquid stability into which this has translated means that the NDP has an enviable AA+ rating, one investment grade short of getting the highest AAA nod.
Maasdorp didn’t reveal which or how many of the leading agencies had this rating for the NDP on its system.
But he’s confident that in time, as the NDP’s executive structure possibly expands, it could secure further stability for the bank with the hoped-for effect of having its rating adjusted upward to AAA.
Providing some context into multi-lateral peer review mechanisms, he said that the Asian Development Bank, which has a membership of 57 countries, had a triple-A rating mainly because of the diversity of representation in its top structure.
In the meantime the bank will meet in Cape Town in April to discuss future infrastructural projects that, hopefully, may be rand-hedged, provided that the local bond programme receives approval from the Reserve Bank.
Currently the NDP already has a loan book standing at $8.4 billion for infrastructural projects.
Some of these include $200 million given to Transnet for container terminal expansion at the Port of Durban, and $180 million for Eskom to build transmission lines.
The news of the local currency bond market development and the NDP’s strong investment stature also serves as a kind of panacea against the portents of a possible downgrade by Moody’s of South Africa’s sovereign investment rating, a likely scenario considering the damage of load shedding to investor confidence.