Eskom may borrow R1bn through a JSE-listed Sukuk, eight years after first floating the idea

Business Insider SA
  • Eskom is – again – looking at issuing a Sukuk to broaden its base of debtors and manage the cost of its borrowing.
  • It could issue instruments worth R1 billion, and it is looking to a government guarantee and a possible listing on the JSE for the instruments.
  • Eskom has been talking about a Sukuk issue since at least 2012, with new flare of interest in 2014, after SA's first sovereign issue.
  • A Sukuk is a rough equivalent of a bond, but requires ownership of an asset.
  • For more stories go to

Eskom could finally be tapping into money from the Gulf region and Malaysia through a Sukuk soon, after eight years of considering such an instrument.

The target issue size will be R1 billion, Eskom told Business Insider South Africa.

Tender documents for the project show that the company intends a rand-denominated Sukuk, listed on the JSE, with a government guarantee.

Eskom would like to "diversify funding sources and execute cost effective funding at acceptable risk" up to 2025, it told potential suppliers who could help it get the instrument off the ground.

The state-owned enterprise has officially been eyeing Sukuk since at least 2012. In 2015 the South African Treasury issued its first Sukuk, a $500 million instrument it described as a "drive to broaden the investor base and to set a benchmark for state-owned companies seeking diversified sources of funding for infrastructure development."

One state-owned company, Eskom, then recently downgraded by a ratings agency, took notice, and said it would look at "a lot" of such instruments

It never did.

That company was not this week prepared to disclose a possible date of issue, saying only it "will work towards establishing timelines for a potential issuance."

While they are often referred to as Islamic bonds, there is some debate on how just different Sukuk are from bonds, but they are perhaps most clearly described as akin to securitisation, in that an asset is split among many investors through a special investment vehicle.

Sukuk serve the same purpose as conventional bonds, by raising money up front in return for payments over time. But while bonds are pure debt instruments, Sukuk are asset-backed, tradable, and offer stable or variable income, depending on the structure. Like bonds, they come with a balloon payment on maturity, but that is based on the market price of the underlying asset, not the amount of money originally invested.

Because investors are buying into an asset and its cashflow, the structure does not require the payment of interest, so as long as the underlying asset is Sharia compliant, the Sukuk is too. 

Britain issued the first sovereign sukuk outside of the Islamic world in 2014, to what it described as "very strong demand".

The market for the instruments is dominated by Malaysia, but several African countries saw the opportunity to tap into money from the Gulf before South Africa's first issue of a Sukuk in 2014.

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