This is a guide on how to buy government bonds in South Africa. Government bonds are one of the safest investment assets. Investors lend money to the government, which the government uses to fund projects and development. The government pays back this loan with interest.
Buying Retail Savings Bonds
The minimum amount that you can use to buy Retail Savings Bonds is R1 000 and the maximum amount is R5 million. Retail Savings Bonds span for a minimum of 2 years and a maximum of 10 years. To buy a Retail Savings Bond you should do the following.
You are supposed to provide your personal information and register with RSA Retail Savings Bonds. This can be done at the post office, directly at the National Treasury or through the RSA Retail Savings Bonds website.
Online registration is the quickest way to register, it only requires personal information like your name, ID number, physical address etc. You will also be required to answer some security questions.
2. Apply for the bond
Similarly, you can apply for a Retail Savings Bond using the outlets mentioned above. You will get an application form similar to the one below. You have to state the amount of money that you wish to invest and for how long, then proceed to enter your personal details.
It’s important to distinguish between Fixed interest bonds and inflation linked bonds. The above image is for the inflation linked bond, which is generally the better option. Inflation linked bonds protect your money from being devalued by inflation.
3. Make a Payment
You can pay with internet banking or through any branch of the South African Post Office. A lot of other payment methods are accepted like direct bank deposits and cheques. The amount of money you pay should be the one that you want to invest with the government.
Buying Government bonds on the JSE
The government lists bonds on the JSE, these bonds are publicly traded, meaning, you can sell your bonds to other traders if you see better returns somewhere else. Bonds are usually sold for less than their initial purchase and the sale doesn’t affect the interest rate of the bond.
Government entities issue bonds on the JSE debt board, these bonds are usually used to fund projects such as roads and power stations. There is over R1 trillion that is currently listed on the JSE’s debt board.
Unlike Retail Savings Bonds, the bonds bought through the JSE are highly liquid and can be sold to other investors. Using the JSE can be quite risky if you are not experienced. Get a certified broker to do the bidding on your behalf. Some financial advisors don’t have your best interests at heart, make sure that you get a broker that is trusted and recommended.
This was a guide on how to buy government bonds, do you have any thoughts or questions? Comment below.