Overview
Goldman Sachs analysts assess that South Africa could regain its first investment‑grade sovereign credit rating (BBB+) by 2028, following a series of fiscal and economic improvements observed since the pandemic. The country's median credit rating had fallen five notches from BBB+ to BB‑ between 2010 and the early 2020s, reversing a period of upgrades from 1995 through 2009. The downgrades were driven by a slowdown in growth from a 10‑year rolling average of 4% to 1% and a tripling of public debt from 24% of GDP in 2007.
Recent Improvements
Goldman Sachs highlights three key areas of progress: fiscal deficits have narrowed and public debt is now on a declining trajectory; GDP growth has picked up, with the bank projecting medium‑term growth around 2.5%, well above the 1% average recorded over the previous decade; and supply constraints in electricity and transport have eased. The political environment is also seen as supportive, with the 2024 transition from a single‑party ANC majority to a coalition government providing continuity for economic policy.
Rating Outlook
The investment bank expects rating agencies S&P and Moody’s to upgrade South Africa from its current BB/Ba2 level to BB+/Ba1 within the next year. Under its baseline scenario, the country is anticipated to achieve an investment‑grade rating in 2028, though the timing carries two‑sided risks.
Market Implications
Goldman notes that markets have not yet priced in a return to investment grade. Their analysis suggests that 10‑year South African government bond yields could fall to 7.6%, a reduction of 110 basis points, while 5‑year credit default swap (CDS) spreads could narrow to approximately 100 basis points, down 20 basis points. The bank also sees greater structural upside for equities over time if macro‑economic improvements persist, given the larger rally observed in fixed income relative to equities to date.
Conclusion
The report underscores that sustained fiscal consolidation, declining debt levels, and modest GDP growth are central to the anticipated rating upgrade, while acknowledging the inherent uncertainties surrounding the timeline.