South Africa could regain investment-grade credit status by 2028, Investec Investment Management said on October 19, citing improving public finances and policy reforms while warning that global economic risks could complicate the recovery.

The investment firm said the prospect of an upgrade was plausible, although achieving it would depend on continued fiscal discipline by the National Treasury and the country’s ability to sustain economic reforms.

Osagyefo Mazwai, an investment strategist at Investec Investment Management, said the firm’s South Africa Asset Allocation Committee viewed a return to investment-grade status by 2028 as a high-conviction investment outlook.

Investec estimated the probability of achieving that goal at above 50%, according to its published analysis.

The assessment comes after a series of improvements in South Africa’s sovereign credit ratings, which have helped reverse a prolonged period of negative rating momentum.

Fiscal discipline remains central to the outlook

South Africa’s creditworthiness has been constrained by weak economic growth, high public debt and persistent structural challenges. However, recent improvements in fiscal management have encouraged rating agencies to reassess the country’s prospects.

In June 2026, Fitch Ratings upgraded South Africa’s long-term foreign- and local-currency credit ratings to BB from BB-, maintaining a stable outlook. The South African government said the decision reflected progress in fiscal consolidation, improved revenue collection and disciplined expenditure management.

Fitch’s move was its first upgrade of South Africa in almost 21 years, according to the National Treasury.

Moody’s Ratings revised its outlook on South Africa to positive from stable in May 2026, while affirming its Ba2 ratings. The agency cited strengthening fiscal performance and continued structural reforms, which it said could help stabilise government debt and gradually improve debt-servicing costs.

S&P Global Ratings had upgraded South Africa’s rating by one notch in November 2025 and maintained a positive outlook.

Despite these improvements, the three major agencies still rated South Africa below investment grade as of the latest government announcements in June 2026. Regaining that classification would require further progress rather than relying on the recent rating changes alone.

Debt management and economic reforms

Investec’s assessment places particular emphasis on the government’s ability to maintain fiscal consolidation, a process of narrowing the gap between public revenue and expenditure.

A sustained primary budget surplus, in which government revenue exceeds expenditure excluding interest payments, can help stabilise the debt burden and reduce the need for additional borrowing.

The National Treasury has identified stabilising and eventually reducing the public debt-to-gross domestic product ratio as a central fiscal objective. It has also indicated that a fiscal anchor would be used to strengthen the framework for managing public finances.

In its June statement responding to Fitch’s upgrade, the government said South Africa had moved from primary fiscal deficits to consistent surpluses.

It also pointed to a long average maturity of government debt and a relatively small share of foreign-currency-denominated borrowing as factors supporting the country’s credit profile.

Structural reforms are another part of the recovery strategy. Improvements in electricity supply, freight logistics and other network infrastructure are intended to reduce constraints on businesses and support higher economic growth.

However, reforms must translate into sustained economic performance for the benefits to feed through fully to the sovereign credit rating. Persistent unemployment, weak growth and pressure on public finances remain challenges.

Global conditions could affect the timeline

Investec cautioned that the route back to investment grade could be more sensitive to international economic developments than domestic factors.

Mazwai identified geopolitical conflicts in the Middle East and Eastern Europe, rising bond yields, fiscal pressures and tighter monetary policy as external risks that could affect the outlook.

Higher global borrowing costs can increase financing pressures for governments and businesses, while geopolitical tensions can disrupt trade, raise energy prices and weaken investor appetite for emerging-market assets.

South Africa’s local government elections, expected in the coming weeks, also present a potential risk to the political stability indicators monitored by credit rating agencies. Investec said local elections generally have less influence on the national policy environment than national elections, while acknowledging the uncertainty.

The combination of domestic fiscal improvements and external risks means the timing of a potential upgrade remains uncertain. Investec’s probability assessment represents the firm’s view rather than a commitment by any credit rating agency to change South Africa’s rating.

What investment-grade status could mean

Investment grade is a credit classification assigned by rating agencies to borrowers considered to have a relatively strong capacity to meet their financial obligations.

The threshold differs by agency, but generally begins at BBB- for S&P Global Ratings and Fitch Ratings and Baa3 for Moody’s Ratings.

Countries below that threshold are commonly classified as speculative grade. Such ratings can affect the range of investors willing or permitted to hold a country’s government bonds.

Regaining investment-grade status could broaden South Africa’s access to international capital, potentially attract additional institutional investment and support lower borrowing costs over time.

The scale of any benefit would depend on market conditions, investor demand and the country’s economic performance.

Lower government borrowing costs could also create more room for public spending priorities, although an improved credit rating would not automatically resolve the country’s fiscal or employment challenges.

For businesses, improved sovereign creditworthiness can help strengthen financing conditions and investor confidence. Households could benefit indirectly if lower funding costs feed through to the wider economy, although the effect on consumer borrowing rates would not be immediate or guaranteed.

South Africa’s progress towards investment grade will therefore depend on whether recent fiscal improvements can be sustained, reforms can support stronger growth and the government can manage its debt burden amid uncertain global conditions.