South Africa

Country Summary

Macroeconomic performance and outlook

Real GDP grew at an estimated 0.7% in 2019, down from 0.8% in 2018, and is projected to rise to 1.1% in 2020 and 1.8% in 2021 amid domestic and global downside risks. Contraction in agriculture and mining drove slow growth in 2019. Agriculture contracted 4.8% and mining 1.7% in 2018. Besides erratic weather, a protracted debate about land reform weighed on agri- culture. Electricity shortages and prolonged strikes contributed to the mining decline. The finance, real estate, and business services sector grew 1.8% in 2018 to con- tribute 0.4 percentage point to growth. Transport grew 1.6% in 2018 while manufacturing grew 1% in 2018. Manufacturing production was depressed by frequent electricity shortages, higher input prices, and weak demand amid ongoing international trade tensions.

Household and government consumption remained a key driver of growth, contributing 1.5 percentage points in 2018. Inflation was 4.7% in 2018 and 4.4% in 2019, due to lower fuel costs. From November 2017 to November 2018, the real exchange rate increased 8.1%, eroding the competitiveness of South African exports. The rand traded at 13.23 per dollar in 2018. Due to infla- tion targeting, the exchange rate pass-through to inflation has been limited.

The fiscal deficit remained high at an estimated 4.3% in 2019, up from 4.2% in 2018, as the country contin- ued to face revenue shortfalls due to slow economic growth. The tax revenue-to-GDP ratio declined marginally to 25.7% in 2019 from 25.9% in 2018. The fiscal deficit is financed through domestic capital markets. National government debt was estimated at 55.6% of GDP in 2019, up from 52.7% in 2018. Foreign debt accounted for only 6.3% of GDP, ensuring sustainable debt financing. The current account deficit widened to 3.5% in 2018, as the terms of trade deteriorated, with rand prices of imports increasing more than those of exports. The current account deficit was financed pri- marily through foreign direct investment inflows, which grew 163% in 2018 compared with 2017.

Unemployment increased to 27.1% at end 2018 from 26.5% at end 2016. Youth unemployment increased to 54.7% at end 2018 from 51% at end 2016. Among the causes of high unemployment are low skills. South Africa’s poverty rate was 55.5%, and its inequality is among the world’s highest.

Tailwinds and headwinds

Reforms are tackling structural constraints to economic growth and job creation. One is restructuring the utility company Eskom to reduce the major risk its debt places on the treasury. Other reforms include allocating the telecommunications spectrum, removing barriers to mining investment, and reviewing visa requirements to boost tourism. The government is taking steps to improve investment, revitalizing townships and industrial parks.

South Africa’s global competitiveness ranking declined sharply—to 67 of 140 countries in 2018 from 47 in 2016. The fall was mainly due to skill shortages, health sector challenges, weak domestic product competition, and limited information and communication technology adoption. Value chain linkages between mining and manufacturing are weak since South Africa exports the bulk of its mineral resources raw. This in turn exposes the country to recurrent global commodity price shocks.

Weak global growth, global trade tensions, and commodity price volatility also pose risks to the South African economy. A high public sector wage bill, poor performance of state-owned enterprises, and social programs, including national health insurance, exert pressure on the budget. South Africa would benefit by manufacturing more for African markets.

Health sector preparedness

The 2019 Global Health Security Index ranked South Africa 34 among 195 countries worldwide and at the top of Afri- can countries in preparedness to face the pandemic from a clinical perspective. Its score of 54.8 is well above the African average of 31.1 and the global average of 40.2. South Africa increased its capacity for COVID–19 testing to more than 10,000 tests a day, and by 25 May had con- ducted 596,777 tests.

Policy responses

South Africa declared a national state of disaster on 15 March. The main emergency measures concerned ban- ning travel, shutting down land ports and seaports, and encouraging social distancing. South Africa has been under one of the strictest lockdowns in the world from 26 March, including a ban on alcohol and cigarette sales.
The authorities allocated ZAR30 billion ($1.6 billion) to a special National Disaster Benefit Fund and a Solidarity Fund to pool funds from government, businesses, and pri- vate individuals. The Reserve Bank has reduced the key repo interest rate by 250 basis points cumulatively from 6.25% to 3.75% to stimulate credit to the economy. Com- mercial banks are exempt from provisions of the Competi- tion Act to enable them to develop common approaches to debt relief and other necessary measures.

The government is implementing a COVID–19 pan- demic stimulus package of ZAR500 billion ($26.3 billion) equivalent to 10% of GDP, distributed as a loan guarantee scheme (40%); job protection and worker income (28%), tax relief (14%); social grants (1%); COVID–19 health related services (4%), and municipality emergency services (4%). On 5 May 2020, the National Treasury Strategy 2020–2025 presented plans for the first time to mobilize $10 billion from multilateral development banks to support the economy.

Source: African Economic Outlook 2020

Fixed Income


South Africa is not only a dominant economy in Africa, it also has the most developed domestic debt market in the region. The government securities yield curve extended to 35 years.  In the decade since the global financial crisis, government has run large budget deficits, raising its borrowing and making the increase in South Africa’s debt-to-GDP ratio among the highest of peer countries (MTBPS,2019).

Issuance strategy 

According to the 2019 Medium Term Budget Policy Statement , Government’s gross borrowing requirement  consist of the budget deficit and maturing debt . It is expected to increase from 7.6 per cent of GDP in 2019/20 to 8.2 per cent of GDP in 2022/23. It will be financed by raising funds in both the domestic and international capital markets. Domestic debt issuances will remain the major source of financing. During 2019, government increased auction levels and borrowing from the Corporation for Public Deposits to cover cash flow pressures, provide financial support for Eskom – as announced in the 2019 Budget and in the Special Appropriation Bill – and provide for anticipated revenue shortfalls. As a result, no further adjustments to domestic bond auction levels were needed to provide for the higher MTBPS gross borrowing requirements. 

Benchmark issues 

By re-issuing existing bonds in the domestic market, the government is able to efficiently reach a benchmark size for SOCs and private-sector companies, as well as meeting market demand. South Africa has a government benchmark yield curve. 

There is only one official benchmark bond, the R186, with a maturity of 10Y. The R207 bond with a 4Y maturity is used at the shorter end, and the R209 bond with a 20Y maturity is used in the ultra-long end. Additionally, the R2048 bond with a 32Y maturity point is becoming a benchmark bond of sorts.

Yield curve 

Yield curve calculation models 

On one hand, South Africa has an implied yield curve:  Nelson-Siegel for inflation-linked bonds and Vasicek for fixed-rate bonds and zero-coupon bonds. This yield curve is for internal purposes. 

On the other hand, there is a market curve in South Africa. 

Interpolation methods 

Where there is no traded yield for a certain point along the yield curve, interpolation is used to generate an appropriate yield. The linear interpolation method is used in the case of South Africa. 

Yield curve managed by 

The National Treasury is in charge of calculating the implied yield curve on a daily basis. This yield curve is not published. However South Africa has a market curve based on secondary market activity (i.e. bid, offer trade price/yield). 

Display platform 

The market yield curve can be accessed from the Reuters and Bloomberg systems. 

Challenges in building an efficient yield curve 

There are no particular challenges for South Africa’s benchmark yield curve. 

Guide to Buying Bonds

Procedures for market participation

Procedures for market participation for residents

Primary issues of treasury bills and fixed-rated bonds are restricted to primary dealers and selected banks. Participation to auctions of inflation-linked bonds is opened to members of the Johannesburg Stock Exchange(JSE).

Retail savings bonds can be purchased online, by telephone, with a broker of the BESA, in person at the National Treasury (NT) (Asset and Liability Management Division) and at any Post office. Rates are advertised as being competitive, with no commission or agency fees. The amount that can be invested ranges between ZAR 1,000 and ZAR 5 million for both fixed-rate and inflation-linked bonds.

Procedures for market participation for non-residents

Bondholders who are not resident in the Common Monetary Area (South Africa, Lesotho, Swaziland and Namibia) will be issued a certificate endorsed as ‘non-resident’.

A non-resident must instruct their nominated Participant or Authorized dealer as to how funds due to them from the Bonds are to be dealt with. These funds can be remitted abroad granted that the relevant Bonds are acquired with foreign currency introduced into South Africa.

Settlement cycle

The settlement cycle for on-market bonds stands at T+3 and that for off-market bonds at T+1, T+2, T+3, with the possibility of trades being rolled for up to three days to a T+6 maximum. Settlement is handled by Strate, the Central and Securities Depository in South Africa.


There is no withholding tax on interest income for both residents and non-residents. However, effective March 1st, 2014, a 15% tax rate will be applicable to interest earned by foreign investors.

Capital gains are taxed at the normal income tax rate on 50% of the gains. However, gains on the sale of substantial foreign shareholdings are exempt if certain conditions are satisfied.

Market restrictions

Openness to international investors 

Foreign participation is authorized in the government securities market. Municipal bonds and RSA retail bonds are restricted to permanent residents and citizens.

Virtually all business sectors in South Africa are open to foreign investors. Government approval is not required to invest, and there are few restrictions on the form or extent of foreign investment. 

Capital controls 

The Exchange controls have been replaced with prudential limits for institutional investors. Non-residents are largely exempt from exchange controls. Restrictions are in place for South African domiciled companies and citizens. Most of the restrictions on outward foreign direct investments have been lifted, except for restrictions on banks where it is set to a maximum of 40% of assets.

With regard to individuals, a maximum of ZAR 4 million may be invested offshore and the annual discretionary amount has been increased to ZAR 750 000. The major limitations are on institutional funds, which can hold up to a maximum of 20% of assets in foreign investments.

Restriction on foreign exchange and profit repatriation

The South African Reserve Bank's (SARB) Exchange Control Department administers the foreign exchange policy. An authorized foreign exchange dealer, normally one of the large commercial banks, must handle international commercial transactions and report every purchase of foreign exchange that is received by South African residents or companies. Generally, there are only limited delays in the conversion and transfer of funds.

Non-residents may purchase local securities without restriction. Non-residents may freely transfer capital into and out of South Africa. These transactions must be reported to the authorities. Foreign investors should ensure that an authorized dealer endorses their share certificates as "non-resident" to facilitate the repatriation of capital and profits. Foreign investors should also maintain an accurate record of all investments.

Credit rating

Rating Agency

Current Rating










Standard & Poor’    




List of primary dealers

The primary dealers authorized by the NT are: 

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