Johannesburg - Foreigners seem to perceive SA's political risk as far lower than what locals believe it to be, after treasury succeeded in raising its biggest global bond ($2bn, or R15.16bn) at a historically low rate.
Director general in the treasury, Lesetja Kganyago, confirmed the bond was allocated to 320 different investors on Tuesday, with 59% going to the US, 33% to Europe, 4% to Asia and a small percentage to Latin America.
The ten-year bond gives South Africa a coupon of 5.5% and completes the funding required for the 2010/11 fiscal year.
"This is definitely an indication of [investor] appetite and confidence," said FNB economist Cees Bruggemans.
News of treasury's success in registering this bond coincided with President Jacob Zuma's first state visit to Britain.
While the visit is aimed at shoring up investor confidence, Zuma has been blasted in the British media following his headline-grabbing personal indiscretions, seemingly dithering leadership on key policy issues as well as infighting in the ANC.
The Financial Times labelled his visit a "comic opera". But the paper did concede that investors, especially those in other emerging markets, don't regard South Africa as a "failed rainbow nation".
RMB currency strategist John Cairns said that the bond proved how foreigners were still interested in investing their portfolio money in South Africa.
Foreign direct investment was more difficult to attract to South Africa than investment by portfolio managers, said Cairns. He added, however, that foreigners were well aware of local politics but viewed political risk "to be far lower in South Africa than in other emerging markets".
Bruggemans added one should "never confuse" political and media comment with what the market was prepared to do. Bruggemans agreed with Cairns that the bond was also testimony to the credibility treasury had built up over the years.