A bond is essentially a loan you give to a company, a municipality, or the government. It is a type of investment. When you buy a bond, you are lending money—and in return, they pay you interest as income and promise to pay back the original amount (called the capital) at a fixed date in the future.

Important: an "investment bond" is not to be confused with a "mortgage bond", which you take out from a bank to purchase a property. Besides sharing a common name, these are entirely different things.

How Do You Earn from a Bond?

Bonds pay regular interest, usually every six months. For example, if you invest R10,000 in a bond with a 7% annual interest rate, you’ll earn R700 per year. This interest is your income from the bond.

Bonds can be issued by:

• The South African government (like RSA Retail Savings Bonds),
• State-owned enterprises (like Eskom),
• Or private companies.

What About Tax?

In South Africa, interest income is taxable. However, individuals get an annual exemption: the first R23,800 of interest income is tax-free if you’re under 65. If you’re 65 or older, the first R34,500 of interest income is tax-free.

Anything you earn above that exemption gets added to your other income and is taxed according to your marginal income tax rate (just like your salary).

Investment Horizon

Many South Africans use RSA Retail Savings Bonds for 2–5 year investments, especially retirees looking for steady, tax-efficient interest income. Institutions like pension funds may hold long-term bonds for decades.

So, while you can invest in bonds for as short as a year, most people use them for 3–10 years or more, depending on the purpose.

In Summary

• Bonds are loans you give, and you earn interest in return. 
• They are a type of investment
• South African individuals get a tax-free interest allowance (R23,800 or R34,500 depending on age).
• Interest above that is taxable.

Bonds can be a safe way to earn regular income—just make sure to include the interest in your tax return!