South Africa Could Regain Investment Grade by 2028, Goldman Sachs Says

Goldman Sachs analysts project South Africa could regain its first investment-grade credit rating by 2028, a significant turnaround driven by sustained fiscal improvements, easing economic constraints, and a stable policy environment. The investment bank's baseline scenario points to a potential recovery after more than a decade of credit downgrades.

Path to Recovery

According to a note from the investment bank, South Africa's outlook has improved across three key areas. The country has made progress on fiscal consolidation, with deficits narrowing and public debt now on a downward trajectory. This is coupled with an improved growth picture as supply-side constraints in critical sectors like electricity and transport have eased.

Goldman Sachs now forecasts medium-term GDP growth rates of around 2.5%, a notable acceleration from the 1% average seen over the past decade. Analysts also noted that the political environment following the 2024 election has supported economic policy continuity, even with the transition to a coalition government.

Reversing a Decade of Downgrades

The potential upgrade would mark a reversal of a painful period for the nation's creditworthiness. Between 2010 and the early 2020s, South Africa's median credit rating plunged five notches from BBB+ to BB-, falling deep into sub-investment grade, or "junk," territory.

That decline was fueled by a sharp slowdown in growth and a ballooning debt load. During that period, 10-year rolling average growth fell from 4% to 1%, while public debt tripled from 24% of GDP in 2007.

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Market Implications

Goldman Sachs stated that a return to investment grade is not yet substantially priced into South African markets, suggesting potential upside for investors. The bank's analysis indicates significant room for fixed-income assets to rally if the country's economic trajectory continues to improve.

The report outlined several potential market impacts:

• 10-year bond yields could fall by 110 basis points to 7.6%.
• 5-year credit default swap (CDS) spreads could tighten by 20 basis points to around 100 basis points.
• South African equities could see more "structural upside" over time.

While the baseline forecast targets 2028 for the first investment-grade rating, Goldman anticipates interim steps. The bank expects upgrades from S&P and Moody's within the next year, which would lift the country's ratings from BB/Ba2 to BB+/Ba1—one notch below investment grade. The analysts cautioned, however, that the timing carries "two-sided risks."