Investors betting on South Africa

South Africa’s sovereign credit rating doesn’t reflect improved investor sentiment, the head of the country’s stock exchange said, pitching for an upgrade from S&P Global as its markets and listings pipeline show signs of a recovery.

“The markets are essentially the canary in the coal mine,” Johannesburg Stock Exchange CEO Leila Fourie said in an interview.

S&P is scheduled to review South Africa’s high yield ‘BB-’ sovereign credit rating on Friday, and economists including Andrew Matheny at Goldman Sachs Group Inc. expect an upgrade. 

South Africa’s economy and stock exchange are turning a corner after years of subdued activity under former President Jacob Zuma.

Its credit rating has been downgraded five times in a row by S&P, with the last upgrade in 2005, according to data compiled by Bloomberg.

A credit rating upgrade would lower the cost of borrowing for the government, lead to a re-rating of banks and change investor sentiment, Fourie said.

“The sustained growth of South Africa’s markets, and increased foreign investment appetite, underpinned by fiscal credibility and policy reform signal South Africa is ready for a sovereign ratings upgrade,” Fourie said. An improved credit score may “ultimately put South Africa back on the map as a genuine investment destination,” she said.

Peer company Moody’s Ratings is expected to review South Africa’s sovereign rating in December, while Fitch Ratings Inc. will reevaluate its assessment in the first half of next year.

South Africa is the continent’s largest economy and has been struggling with sluggish growth and policy uncertainty. That’s changed since the formation of the so-called government of national unity in June last year, improving economic sentiment and financial markets.

S&P raised South Africa’s rating to positive last November, citing increased political stability after the elections.

The FTSE/JSE Africa All Shares Index has been one of the stronger performing market gauges worldwide, surging 46% this year in US dollar terms, compared with a 20% rise in the MSCI All Country World Index.

Improved markets and sentiment have also contributed to an increase in companies preparing listings in Johannesburg.

Last week, artificial intelligence-backed fintech Optasia listed and mobile network operator Cell C announced plans for an initial public offering on the exchange.

Security firm Fidelity has hired banks to work on an IPO. Meanwhile, Canal+ and Coca-Cola HBC are planning secondary listings.

There are more than 50 private companies looking for debt and equity investment on the JSE’s private-placements platform, Fourie said.

South Africa’s stock market is on track for its strongest year since 2006 and the price of 10-year government bonds has climbed to a seven-year high. Foreign bond inflows have increased this year, compared with the same period a year before, said Fourie. While average daily value traded in the equity market is close to 28 billion rand ($1.6 billion) in 2025 from 21 billion rand in the previous year.

Finance Minister Enoch Godongwana will on Wednesday present the mid-term budget review that’s expected to show stronger-than-expected growth in government revenue and a better-than-forecast fiscal deficit. 

“We are aware that S&P is engaging relevant stakeholders to take into account our stronger fiscal framework, and while we are still struggling with high unemployment and subdued growth, there are building blocks put in place for growth,” Fourie said.