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08 August 2007
Jozibond for man-on-the-street
The City of Johannesburg has launched 2-, 3- and 5-year retail bonds, called Jozibond, and Standard Bank has been key to bringing these to the market. Standard Bank assisted the city as sole advisor and arranger of the retail bond issue.
Trading in R1 000 denominations makes Jozibond the first bonds in South Africa aimed at "man in the street". It is also the first retail bonds to be issued by a municipality in South Africa.
The intention is to create a community of "proud Johannesburg residents" by giving people of the city the chance to invest directly in their city - while also encouraging them to save.
Further objectives are to diversify the city's financial instruments currently on offer to the market and to establish an alternative source of funding for the city. Money raised in the retail bond will be used to enhance service delivery, involve residents in funding the capital expenditure of their city and promote a savings culture among residents.
"The exciting aspects of this bond are the access for retail investors. Usually only institutional investors can buy directly into bonds which normally have a minimum investment amount of R1 million. Also, Johannesburg citizens can actively participate in the improvements to their city," says Andrew Costa from Debt Origination, Corporate and Investment Banking.
"As the first retail bond in South Africa and taking into account the City's social objectives, the team had to find innovative solutions, for example using Standard Bank's Online Share Trading to act as the stockbroker for people who do not have access to one and the South African Post Office as a distribution point. We hope this will be the start of many more retail bonds in this market," concludes Andrew.
Features of Jozibond
- The City will issue three different Jozibond with maturities of 2, 3 and 5 years respectively.
- Each Jozibond will pay a quarterly coupon (interest payment). The coupon will be referenced to three-month JIBAR (the rate at which banks lend and borrow money to and from each other) plus a margin. The longer the maturity of the bond, the greater the margin.
- The 2-year bond pays JIBAR + 5 basis points (9.92% a year*).
- The 3 year bond pays JIBAR + 25 basis points (10.12% a year *).
- The 5-year bond pays JIBAR + 40 basis points (10,27% a year *).
- Jozibond will be listed and tradable on the JSE.
- Standard Bank will make a market in the Jozibond on behalf of the City (ie. quote a bid and offer a price on a daily basis) and accordingly you can sell bonds back to the City.
- The Jozibond will have a minimum investment amount of R1000 at the primary offering and will trade in denominations of R1000.
- Interest earned may form part of an individual's tax interest exemption allowance.
- No brokerage is payable in the primary offering and there is no Uncertified Securities Tax payable.
- No annual management fee is levied by the City.
*Interest rates are calculated as at 23 July 2007 for illustration purposes only. Final interest rates will be set on 21 September 2007 when the bonds list.
The primary offer is open from 8 August to 7 September 2007.
Orders can be submitted via Online Share Trading (www.securities.co.za or call 0860 121 161), a JSE stockbroker or any post office in Gauteng. Please check cut-off times with your stockbroker. Terms and conditions do apply.
About the City of Johannesburg
This is South African's largest metropolitan municipality in terms of population at an estimated 3.7 million people with 17% of South Africa's population. The city makes up 16% to South Africa's economy.
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