South Africa Could Regain Investment-Grade Status by 2028, Investec Says

South Africa could regain investment-grade credit status by 2028, supported by fiscal consolidation and its removal from the Financial Action Task Force’s greylist, according to Investec Investment Management.

The firm’s South Africa Asset Allocation Committee estimates that the country has more than a 50 percent probability of achieving investment-grade status within the next two years, citing improvements in the macroeconomic environment and the government’s efforts to strengthen public finances.

Recent credit rating upgrades and positive commentary from Moody’s have reinforced the prospect of further improvements, Investec said, arguing that the direction of travel favours a return to investment grade.

The firm distinguished between whether such an outcome is plausible and whether it is probable, concluding that recent policy implementation and fiscal discipline have strengthened the likelihood of an upgrade.

National Treasury’s execution of its fiscal consolidation plans will be central to the outlook, Investec said. The country’s removal from the Financial Action Task Force’s greylist, which identifies jurisdictions requiring increased monitoring for deficiencies in combating money laundering and terrorist financing, has also supported the assessment.

Political stability remains a risk, particularly ahead of local government elections. However, Investec said municipal elections generally have less influence on national policy than national elections.

External risks include conflicts in the Middle East and Eastern Europe, rising bond yields, fiscal pressures and tighter monetary policy globally.

Investec said the outlook would depend on the government’s ability to maintain fiscal discipline and deliver on its commitments, with execution by National Treasury remaining a key factor in South Africa’s potential return to investment-grade status.

Source: FSX Business News