Investors are falling back in love with South Africa
Foreign investors have been net purchasers of South African bonds for the past four weeks, having bought a net R53.57 billion in bonds since the start of the year.
This is despite the ongoing conflict in the Middle East, which has caused risk-off sentiment to prevail among global investors.
Investec chief economist Annabel Bishop explained that foreign investor sentiment towards South Africa is currently positive.
She pointed out that non-resident investors have been net purchasers of South African bonds in July to date, despite a sell-off in some weeks of June.
She attributed this to the inroads the Government of National Unity has made in tackling structural problems. Most recently, this has included clamping down on municipal finances.
On Tuesday, 7 July, the National Treasury announced that it would temporarily withhold the July 2026 equitable share transfers to 69 municipalities.
The transfers will be released to the municipalities once they can show strict adherence to the Municipal Finance Management Act.
This includes submitting signed payment plans with proof of payment to settle their outstanding debts, submitting and having credible budgets approved, and setting targets to reduce unlawful expenditure.
Describing the move as “corrective”, the Treasury said it is meant to instil fiscal discipline and root out financial misconduct.
Since the Treasury’s decision was announced, 42 out of the 69 municipalities affected have complied with the requirements, and their share transfers have been reinstated.
Bishop said resolving financial problems at the local government level is key to strengthening the sustainability of South Africa’s government finances.
In turn, this is key to credit rating agencies’ assessment of South Africa’s creditworthiness and risk premiums.
If South Africa can improve local governments’ financial standing, it will go a long way in making credit rating agencies view the country as a stable investment destination.
Foreign investors are loving South African bonds
In the year-to-date, foreign investors have purchased a net of R53.57 billion in South African bonds. This is up significantly from R42.99 billion at this time last year.
They have also been net buyers of South African bonds for every week of July so far, having purchased a net R1.10 billion worth of bonds in the week ended 17 July 2026.
Notably, this comes despite tensions in the Middle East having escalated in the month of July, with peace talks between the United States and Iran essentially collapsing.
Most recently, Bishop said the United States has expanded its attacks against Iran, moving in on energy plants.
Iran, in turn, is striking American military assets in neighbouring Middle Eastern countries. Despite this break in the ceasefire, peace talks are reportedly ongoing.
Bishop said the resumption of the Middle East war has seen a mild negative impact on global financial market risk appetite.
Risk appetite is subdued but remained in positive territory in July, according to the S&P Global Investment Manager Index.
While this is positive, the index also found that risk appetite remains well below the optimism seen prior to the outbreak of the war.
Bishop pointed out that the rand has been relatively stable in light of the return to war in the Middle East and improving fundamentals domestically.
She said positive developments in South Africa are reflected in credit rating improvements, which have supported the domestic currency.
“Foreign investor sentiment is positive towards South Africa, with net purchases of SA government bonds in July to date, double that of June’s net purchases,” she said.
For two weeks in June, foreign investors were net sellers of South African bonds, though this changed in the last week of June.
Since the week ended 26 June 2026, foreign investors have been net buyers of South African bonds.
The graphs below show foreign investor activity in South African bonds since the start of the year.
Foreign investor bond activity
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