Investec Wealth & Investment International told Moneyweb that South Africa has a better than 50% chance of moving back into investment-grade territory by 2028 if the upcoming mid-term budget delivers a credible fiscal plan.
Investment strategist Osagyefo Mazwai explained that a “sufficiently credible medium-term budget policy statement (government’s fiscal roadmap for the next few years)” could trigger an initial upgrade by Moody’s Ratings and S&P Global Ratings to one notch below investment grade. He added that if the 2027 budget and the 2027 mid-term budget policy statement reinforce that trajectory, a full investment-grade rating (Baa3 or higher) by 2028 becomes achievable.
Both rating agencies already have South Africa on a “positive outlook” (their view that the rating could improve). Currently, Moody’s rates the country Ba2, two notches below investment grade, and has signalled that an upgrade is likely provided fiscal performance continues to improve.
The mid-term budget, due on 21 October from Finance Minister Enoch Godongwana, is expected to show a stronger primary budget surplus (revenue minus non-interest expenditure). A larger surplus would indicate that the government is collecting more than it spends on operating costs, freeing up resources for debt reduction. The budget is also anticipated to detail a fiscal framework aimed at keeping the debt-to-GDP ratio (government debt expressed as a percentage of gross domestic product) under control.
According to Mazwai, the mid-term budget must demonstrate three things: a credible fiscal anchor (clear, long-term commitment to fiscal discipline), a debt trajectory that is decisively moving toward reduction, and debt-service costs that have peaked and can now decline. Credit-default-swap spreads (the market price of insurance against a sovereign default) have already narrowed, suggesting that investors are pricing in an imminent upgrade to one notch below investment grade.
Why does a rating upgrade matter to business readers? A move into investment-grade status would lower South Africa’s sovereign risk premium, which in turn reduces the cost of borrowing for both the government and corporate issuers. Lower yields on government bonds typically translate into cheaper financing for infrastructure projects, corporate loans, and new equity issues. For companies that rely on external capital, the prospect of reduced interest expenses can improve cash-flow forecasts and make expansion plans more viable.
The broader backdrop includes a series of reforms that have helped shift sentiment after years of being shunned by investors. The Treasury’s success in keeping the budget on track, combined with the central bank’s decision last year to lower the inflation target to 3%, a move endorsed by the finance minister, has helped restore confidence. Those steps contrast with the decade of overspending and corruption that characterised the later years of former President Jacob Zuma’s administration.
While the outlook is positive, the path is not guaranteed. The rating agencies will continue to monitor fiscal discipline, debt dynamics, and external vulnerabilities such as commodity price swings and global interest-rate movements. A slip in any of those areas could stall or reverse the upgrade trajectory.
For companies planning capital projects or seeking foreign investment, the next few months are critical. The mid-term budget will be the first concrete test of whether the government can deliver the fiscal anchor that rating agencies demand. A successful rollout could set the stage for a cascade of cheaper financing across the economy, while a weaker budget could keep borrowing costs elevated.
Investors and corporate finance teams should watch the 21 October budget speech closely, as well as the subsequent reactions from Moody’s and S&P. The next rating decision, expected later in the year, will provide the first clear signal of whether South Africa is on track for an investment-grade rating by 2028.
