The objectives of the retail bonds are:
RESIDENTS can invest in the city via municipal bonds the City has issued. Known as Jozibonds, the City's retail bonds are savings products that give private individuals, trusts, stokvels, close corporations, companies and other legal entities an opportunity to invest in municipal-issued securities at competitive and market related interest rates. They are backed by Johannesburg's credit and represent a low-risk investment. The retail bonds will be listed on the Johannesburg securities exchange, JSE Ltd, which will regulate the City's conduct as issuer of the bonds, and so will ensure that the investment is safe.
- To create a "Proud Johannesburg Resident" campaign whereby Joburg citizens can invest directly in the City and enhance service deliveries, as the funding will be used for capital projects;
- To diversify the financial instruments available to investors;
- To establish a different source of investor base;
- To involve the residents in funding the City's capital expenditures; and
- To promote a savings culture in line with national objectives.
The benefits of the retail bond to the investor are:
- Retail bonds will provide people with a safe investment option, offering better interest rates than other savings schemes;
- Residents can invest directly in the City and enhance service deliveries, such as providing better roads, providing better healthcare, or providing water and electricity to all residents; and
- The bonds promote a savings culture in line with the national government, to save for an education, a house or a car.
The benefits of the retail bond to the City are:
They will provide the City with a source of income to improve service delivery.
Types of JozibondsJozibonds are available in three maturities:
- two years (two-year Jozibond);
- three years (three-year Jozibond); and
- five years (five-year Jozibond).
The maturity refers to the term of investment, or the length of time before your investment capital is repaid to you. The retail bond you choose will depend on how long you want to save your money, and what the interest rates for the different retail bonds are at the time that you want to buy. Access to three different maturities allows you to choose the investment term to suit your needs.
Key features of the Jozibond - is this type of investment for me?
When the bonds mature, the City will pay your capital in full.
Competitive interest rates
Johannesburg will pay competitive interest rates to the investor. The interest rate will be linked to the three-month JIBAR, the Johannesburg Interbank Agreed Rate, the average rate at which South African banks buy and sell short-term money. It is a market rate that changes daily based on supply and demand dynamics and resets every three months so that the interest rate earned is market-related. JIBAR is published in the daily financial press. The Jozibonds will sell at an interest of three-month JIBAR plus a margin, which will reflect a credit spread that will depend on the debt rating of the issuer and market conditions at the time of issue.
Regular interest income
Bonds may be suitable for investors who prefer to receive regular income on their capital throughout the investment period. Jozibonds pay interest four times a year and capital when the bond matures.
You can buy Jozibonds at any South African Post Office in Gauteng, through a Standard Bank financial consultant or through a JSE broker. You can sell through the call centre or a JSE broker in the secondary market.
AffordabilityYou can invest a minimum of R1 000 per bond and or more, in denominations of R1 000. Safety of the transactionInterest is payable every three months (quarterly) and capital is repayable on maturity date of the bond. The funds are transferred electronically directly into the bank account of the bondholder or investor. Transactions are performed electronically, minimising errors and fraud. All transactions are performed via debit order (no cash, credit card, cheque or debit card).
There are no service charges or commission when buying Jozibonds during the initial Price Offering (IPO) from 8 August to 7 September 2007 when purchased at SAPO.
Only 1,5 percent on the amount paid out will be charged should you want to sell your investment before maturity.
Should you need to sell your Jozibond early (before maturity), you can contact the Jozibond call centre and your funds will be in your bank account in 10 days. A fee of 1, 5 percent on the amount paid out will be charged for early redemption.
Liquidity refers to the ability of people to get into and out of investments. A "liquid" bond is a bond with a lot of volume that is easy to buy and sell. The Bonds will be listed and trade-able on the JSE.
Market related Interest rates
Jozibonds pay a floating rate of interest that is referenced to the three-month JIBAR interest rate plus a margin.
- If three-month JIBAR increases, the interest rate paid on the Jozibonds increases.
- If three-month JIBAR decreases, the interest rate paid on the Jozibonds decreases.
- The interest rate on the Jozibonds is adjusted /reset every three months.
- The rate is set on each interest payment date for the following three-month period.
The interest rate determined on each interest payment date will be fixed for the interest period until the next interest payment date even though three-month JIBAR may change during that period. Interest payments will be made on the interest payment dates, being every three months, as well as on the maturity date. On the relevant interest payment date, the interest due will be paid into the JSE broker accounts of the bondholders that were registered in the register on the predetermined record date.
Indicative Term SheetDownload PDF