South African financiers are preparing a R2 billion bond to finance water conservation projects dedicated to restoring strategic watersheds.
Backed by the Rand Merchant Bank (RMB) and the Development Bank of Southern Africa (DBSA), the five-year bond aims to finance ecological restoration, including removing invasive plants and rehabilitating watersheds to enhance water security. The results-based facility will link returns to measurable environmental improvements.
“This facility will assist in the conservation of watersheds to ensure the health of these areas,” Mukho MathabaThe DBSA's climate finance expert told Reuters.
The initiative reflects the growing involvement of the private sector as South Africa grapples with limited public finances and significant water challenges. A DBSA study estimates that a total investment of Rs 256 billion is needed annually in the water sector by 2050, leaving a significant funding gap of Rs 91 billion every year.
While traditional bonds target infrastructure like dams and pipelines, this deal emphasizes nature-based solutions. The RMB confirmed its involvement, saying details would remain confidential.
If successful, the bond will align with broader efforts to harness debt markets to finance sustainable infrastructure, helping to address South Africa's worsening water scarcity.