South Africa eyes foreign debt ‘sweet spot’

South Africa’s deputy finance minister said improved investor sentiment has created an opportunity for the country to return to the eurobond market.

“We’re in a sweet spot,” David Masondo told Bloomberg on the sidelines of the Group of 20 leaders’ summit in Johannesburg on Sunday, without giving a specific timeline.

“We are in the right space, and I think for me, it’s a question of how we keep the momentum going.”

The National Treasury said in its medium-term budget policy statement earlier this month that it plans to raise $2.7 billion in global markets to meet foreign-currency obligations for the fiscal year ending in March.

Masondo attributes the improved sentiment to stronger-than-expected revenue and the government’s commitment to rein in debt outlined in the budget update, which prompted S&P Global Ratings to upgrade the country’s credit rating on 14 November.

The upgrade, he said, is the result of years of hard work — pursuing fiscal consolidation, advancing structural reforms, and addressing contingent liabilities linked to Eskom and other state-owned enterprises. 

“Where we are now,” it’s about maintaining momentum on fiscal consolidation, reigniting growth, and accelerating the structural reforms we’ve been implementing in the network industries, he said.

The optimism has lowered South Africa’s borrowing costs. The premium investors demand to hold the nation’s dollar bonds over US Treasuries — known as the sovereign spread — has narrowed to 222 basis points from a peak of 396 in April. That compares with an average of 474 for high-yield bonds across developing nations.

South Africa last sold eurobonds in December 2024, issuing $2 billion of 12-year securities at 7.1% and $1.5 billion of 30-year notes with a coupon of 7.95%.

Masondo, who has been part of South Africa’s G-20 finance track pushing for debt reforms, said that while the bloc’s Common Framework — set up in 2020 to coordinate debt relief for low-income countries — is important, African nations must also tackle structural problems and align fiscal policy to lower borrowing costs.

The framework has faced criticism for being slow and complex, with debt restructurings in countries like Zambia and Ghana taking years to conclude.

For South Africa, during its G-20 presidency this year, “we’ve said there are things the world must do — including reforming the multilateral financial architecture — but there are things that, ourselves, on the continent and in the Global South, we need to do to deal with our problems,” Masondo said.

“We can’t act just as victims, we’ve got to reclaim our agency and do the things that we’ve got to do.”