South African financiers are preparing a R2-billion bond to fund water conservation projects dedicated to restoring strategic water catchments.

Backed by 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 catchment areas to enhance water security. The outcome-based facility will link returns to measurable environmental improvements.

"The facility will support conservation of water catchments to ensure the health of these areas," Mookho Mathaba, climate finance specialist at DBSA, told Reuters.

The initiative reflects growing private-sector involvement as South Africa grapples with constrained public finances and significant water challenges. A DBSA study estimates investments totalling R256-billion annually are needed in the water sector through 2050, leaving a critical funding gap of R91-billion each year.

While traditional bonds target infrastructure like dams and pipelines, this deal emphasises nature-based solutions. RMB confirmed its involvement, saying details remain confidential.

If successful, the bond will align with broader efforts to tap debt markets for sustainable infrastructure funding, helping to address South Africa's worsening water shortages.