South African municipalities are tapping into bond markets to develop infrastructure

Ekurhuleni Metro issued its maiden bond for R815-million last week following the trends of Johannesburg and Cape Town.

Johannesburg issued its first bond in 2004 and has since issued several bonds totalling approximately R7.7-billion, while Cape Town entered the market in 2008 and has since issued three bonds totalling R4.2-billion.

Ekurhuleni Metro spokesman Zweli Dlamini said proceeds had already been used to fund capital expenditure.

According to group chief financial officer for the City of Cape Town, Mike Richardson, raising money through municipal bonds enables municipalities to spread municipal debt evenly. He added that it could be a more economic way of borrowing because it had certain advantages in the sense that you can borrow large amounts of money at very low interest.