South African Government Bonds: The R188 10.5% Opportunity

South African government bonds are one of the most overlooked investments available to retail investors. The SAGB R188 pays a fixed coupon of 10.5% per annum, twice a year, until December 2027. You can buy it on EasyEquities with no minimum investment. And here is the part most people miss: bonds have a face value of R1 per unit. If you buy when the price drops below R1, you lock in a guaranteed capital gain at maturity on top of the coupon income. That is not a speculation. It is math.

Disclaimer: I am not a financial advisor. This information is for educational purposes only and should not be considered as financial advice. Always do your own research and consider seeking advice from a qualified financial professional before making any investment decisions.

This article explains what South African government bonds are, how the R188 works, why buying below R1 per unit is always a good idea, and how to invest through platforms like EasyEquities. If you already understand bond ETFs, this article goes a step further into direct bond investing. For a broader overview, see our bond ETF guide.

What Are South African Government Bonds?

A government bond is a loan you make to the South African government. The government borrows your money and promises to pay it back on a specific date. In return, it pays you a fixed interest rate, called the coupon, twice a year. The repayment date is called the maturity date. The face value of each unit is R1.

Government bonds are considered one of the safest investments in South Africa because they are backed by the full faith and credit of the South African government. The government has never defaulted on its rand-denominated debt. The risk of not getting your money back is extremely low.

Bonds are traded on the JSE Bond Exchange. Institutional investors trade them in yields. But on EasyEquities, they are quoted in rands per unit, just like shares. This makes them accessible to ordinary investors who do not want to deal with yield calculations.

The SAGB R188: 10.5% Until December 2027

The R188 is a South African government bond with a 10.5% annual coupon. It pays 5.25% every six months, on 21 June and 21 December. The maturity date is 21 December 2027. At maturity, the government repays the face value of R1 per unit.

The R188 was created in October 2025 when the R186 bond was split into three separate bonds. The R186 was originally a single bond with a 10.5% coupon and three redemption dates: December 2025, December 2026, and December 2027. The split created three cleaner instruments:

R010 — 10.5% coupon, matures 21 December 2025
R187 — 10.5% coupon, matures 21 December 2026
R188 — 10.5% coupon, matures 21 December 2027

All three bonds inherited the same 10.5% coupon from the R186. The only difference is the maturity date. The R188 gives you the longest runway to earn that 10.5% coupon.

How Bond Pricing Works (And Why Below R1 Is a Great Deal)

This is the most important section of this article. Understanding bond pricing is the key to knowing why buying below R1 per unit is always attractive.

Face Value: R1 Per Unit

Every South African government bond has a face value (also called nominal or par value) of R1 per unit. When the bond matures, the government pays you R1 per unit, regardless of what you paid for it. This is the guaranteed repayment amount.

Market Price: Above or Below R1

The market price of a bond moves based on interest rates. Bond prices and interest rates have an inverse relationship. When interest rates rise, bond prices fall. When interest rates fall, bond prices rise. This means a bond can trade above R1 (at a premium) or below R1 (at a discount).

Here is why buying below R1 is always a great idea:

You buy at a discount. If you buy a bond at R0.90 per unit, you pay 90 cents for something that will be worth R1.00 at maturity.
You get the full coupon. The coupon is calculated on the face value, not the price you paid. A 10.5% coupon means 10.5% of R1, which is R0.105 per unit per year, regardless of whether you paid R0.90 or R1.10.
You get a guaranteed capital gain. At maturity, you receive R1.00 per unit. If you bought at R0.90, that is an 11% capital gain on top of the coupon income.
Your yield to maturity is higher than the coupon. When you buy below par, your actual return (yield to maturity) exceeds the coupon rate. The cheaper you buy, the higher your yield.

A Practical Example

Let us say you buy 1,000 units of the R188 at R0.95 per unit. Your total investment is R950. Here is what happens:

Coupon income: 10.5% of R1,000 face value = R105 per year, paid as R52.50 every six months
Capital at maturity: R1,000 (R1 per unit x 1,000 units)
Capital gain: R1,000 – R950 = R50
Total return: Coupon income plus R50 capital gain

If you had bought at R1.00, you would still get the same R105 coupon. But you would get zero capital gain. The coupon alone is attractive. The capital gain on top is the bonus that makes buying below par so compelling.

The Dirty Price Explained

When you buy a bond on EasyEquities, the price you see is the dirty price. This is the clean price plus accrued interest. Accrued interest is the coupon amount that has built up since the last coupon payment. The dirty price reflects the total amount you pay to buy the bond between coupon dates.

When the coupon is paid out, the bond price drops by the coupon amount. This is similar to how a share price drops when a dividend is paid. You are not losing money. The cash simply moved from the bond into your account.

Bonds Available on EasyEquities

EasyEquities offers several South African government bonds with different maturities and coupon rates. Here are the main ones:

SAGB R187 — 10.5% coupon, matures December 2026
SAGB R188 — 10.5% coupon, matures December 2027
SAGB R2030 — 8% coupon, matures January 2030
SAGB R2035 — 8.875% coupon, matures February 2035
SAGB R2040 — 9% coupon, matures January 2040
SAGB R2048 — 8.75% coupon, matures February 2048

Shorter-dated bonds like the R187 and R188 carry less interest rate risk because they mature sooner. Longer-dated bonds like the R2048 offer higher yields but are more sensitive to interest rate changes. The R188 sits in a sweet spot: a high 10.5% coupon with only about 18 months to maturity.

How to Buy Government Bonds on EasyEquities

Open an EasyEquities account. If you do not have one, sign up at easyequities.co.za. Complete your FICA verification.
Choose your wallet. Bonds are available in three wallets: ZAR (standard), TFSA (tax-free), and RA (retirement annuity). Each has different tax implications.
Search for the bond. Look for SAGB R188 or the bond code of your choice on the platform.
Check the price. The price shown is the dirty price per unit. If it is below R1, you are buying at a discount to face value.
Buy by value. You can invest any amount, such as R100 or R1,000. The platform calculates how many units you receive based on the price.
Hold to the last date to trade. To receive the coupon, you must hold the bond by close of business 4 days before 11 June and 11 December each year.
Hold to maturity for maximum benefit. If you hold to 21 December 2027, you receive the full R1 per unit face value plus all coupon payments along the way.

Tax Treatment of Government Bonds

The tax treatment depends on which wallet you use:

ZAR wallet: Coupon payments are subject to income tax. The annual interest exemption is R23,800 for individuals under 65 and R34,500 for those 65 and older. Any capital gain at maturity is subject to capital gains tax.
TFSA wallet: All coupon income and capital gains are completely tax-free. You can contribute up to R46,000 per year and R500,000 lifetime. See our TFSA guide for details.
RA wallet: Investment growth is tax-free inside the RA. Contributions are tax-deductible up to 27.5% of income or R430,000 per year. See our RA guide for details.

Holding government bonds in a TFSA is particularly powerful. You earn 10.5% per year, pay zero tax on the coupons, and pay zero tax on the capital gain if you bought below par. That is one of the most tax-efficient investments available in South Africa.

Direct Bonds vs Bond ETFs

You might wonder whether to buy individual government bonds or a bond ETF. Here is the difference:

Direct bonds give you a fixed coupon, a fixed maturity date, and a known repayment amount. You know exactly what you will earn if you hold to maturity.
Bond ETFs hold a portfolio of bonds that is constantly rebalanced. They never mature. The yield reflects the average of the portfolio. They offer diversification but less certainty about individual returns.

For investors who want predictable income and a guaranteed maturity value, direct bonds are the better choice. For investors who want ongoing exposure to the bond market without managing maturities, bond ETFs are more convenient. You can read more about bond ETFs in our complete bond ETF guide.

Risks to Be Aware Of

Government bonds are low risk, but not zero risk. Here are the risks to understand:

Interest rate risk. If interest rates rise after you buy, the bond price will fall. If you sell before maturity, you may get less than you paid. This risk is higher for longer-dated bonds.
Inflation risk. The coupon is fixed at 10.5%, but inflation erodes the purchasing power of that income. If inflation is 5%, your real return is 5.5%.
Sovereign risk. South Africa’s credit rating is sub-investment grade. While the government has never defaulted on rand debt, a credit downgrade could push prices down.
Liquidity risk. The bond market on EasyEquities is less liquid than the share market. You may face wider spreads when selling.

If you hold to maturity, interest rate risk and liquidity risk disappear. You will receive R1 per unit regardless of what happens to the price in the meantime. That is the main advantage of holding direct bonds over bond ETFs.

Conclusion

South African government bonds like the R188 offer a rare combination: a high fixed coupon, a guaranteed maturity value, and the ability to buy directly on EasyEquities with no minimum investment. The 10.5% coupon is paid twice a year and is backed by the South African government.

The key insight is simple. Bonds have a face value of R1 per unit. At maturity, you get R1 per unit back. If you buy below R1, you lock in a capital gain on top of the coupon income. The further below R1 you buy, the higher your total return. This is not a complex trading strategy. It is a mathematical certainty built into how bonds work.

For the best tax outcome, hold government bonds in a TFSA or retirement annuity. Both eliminate tax on the coupon income and capital gains. Combined with a 10.5% coupon and a potential capital gain from buying below par, this is one of the most efficient investments available to South African investors.

Your action step: Go to EasyEquities, search for SAGB R188, and check the current price. If it is below R1, you are looking at a guaranteed capital gain plus 10.5% per year. If it is above R1, the 10.5% coupon alone still makes it worth considering. Either way, government bonds deserve a place in a diversified portfolio alongside your equity ETFs and bond ETFs.