What SA can learn from Nigeria's fundraising agenda

It is advancing financial inclusion by democratising access to the capital market

- MUSHTAK PARKER

THEY'RE at it again! The National Treasury, still smarting from its humiliating climb down of abandoning its proposed 1-2% VAT hikes in the revised National Budget in May, ostensibly on a clash of economic orthodoxies with its main Government of National Unity (GNU) partner, the DA, last week raised $1.5 billion through its latest loan from the World Bank to fund the upgrading of the country's infrastructure.

The money, says the Treasury, will be used to improve energy security, enhance the efficiency and competitiveness of freight transport services, and to support South Africa's transition toward a low carbon economy. The loan has a tenor of 16 years with a grace period of three years and is priced at a rate of return of 1.49% over a six-month SOFR (Secured Overnight Financing Rate). This rate is the new global benchmark rate for loans, credit facilities, bonds and Sukuk issuance, which replaced the London Interbank Offered Rate (LIBOR) in June 2023. The SOFR in essence is a broad measure of the cost of borrowing cash overnight collateralised by US Treasury securities.

While SOFR-linked financing facilities are an important part of a diversification of funding sources and of investor base for sovereigns, supranationals and corporates in the post-LIBOR era, it is far from being a panacea for cheap government borrowing. It is hardly three decades ago when borrowing from the World Bank/IMF was a definitive redline for Madiba's term in power which of course was never crossed.