The National Treasury and Nedbank have confirmed that Nedbank internet clients will only be able to buy the retail bonds launched on Monday by the Treasury from Tuesday onwards as “RSA Retail Bonds” needs to be loaded as an option on the approved beneficiary list.
The retail bonds were announced in the February 18 2004 Budget and on May 14 President Thabo Mbeki and Minister of Finance Trevor Manuel bought the first and second retail bonds respectively.
The general public could, however, only start buying from May 24 and Treasury officials said more than 30 individuals have bought retail bonds by midday on Monday.
The Treasury is due to release details on how many retail bonds have been bought in the normal monthly financing statement due for release on June 2.
The retail bond initiative aims to meet part of the government’s borrowing requirement through the issuance of bonds to the public. The launch of the RSA Government Retail Bond is also an effort to promote a culture of saving among citizens.
The term retail bond market is, however, a misnomer, as this market will be similar to the fixed-deposit market and should attract some of the funds that are traditionally lodged with retail banks on long-term fixed deposits.
Individuals will be allowed to invest a minimum of R1Â 000 in the retail bonds compared with the minimum of R1-million that is necessary in the institutional capital market.
The principles guiding the launch of the retail bond market are accessibility, ease of use, simple pricing and reduced administration.
Any individual can invest online night or day via the Treasury website, by post to the Treasury or via one of 2Â 500 post offices.
Initially the individual, who must be a South African resident and more than 18 years old, can invest in either a two-year, three-year or five-year bond, which is held to maturity.
In case of financial distress or death, the Treasury will redeem the bond after a one-year holding period.
At this stage there will be no secondary market and the retail bonds will be unique to the retail market.
The interest earned, which will be paid semi-annually, will be subject to the same tax-free R11Â 000 limit earned on other debt instruments such as fixed deposits.
The Treasury will also allow the interest earned to be capitalised, in order to encourage saving.
Treasury officials are aiming to eventually get 10% of the total bond market or about R40-billion, but most capital market participants say that this amount will be built up over time and only expect R3-billion in its first year. — I-Net Bridge