South Africa

Country Summary

Macroeconomic performance

Real GDP growth was an estimated 0.7% in 2017/18, down from 1.3% in 2016/17. The agricultural sector grew 17.7% in 2016/17, after contracting 10.2% in 2015/16, to contribute 0.4 percentage point to GDP growth. Manufacturing contracted 0.2% in 2016/17 after growing 0.9% in 2015/16. Growth also slowed in the services sector, with growth in finance, the main subsector, slipping from 2.3% in 2015/16 to 1.9% in 2016/17, contributing 0.4 percentage point to overall growth. Household consumption remains the key driver of growth. Household and government consumption contributed 1.5 percentage point to growth in 2016/17, compared with 0.8 percentage point in 2016.

The fiscal deficit remained high at an estimated 4.0% in 2017/18, down from 4.3% in 2016/17, as the country continued to face revenue shortfalls arising from slow economic growth. To bolster domestic resources, the government introduced new tax policies, including an increase in the value added tax from 14% to 15% on 1 April 2018. Public debt reached an estimated 53.3% of GDP in 2017/18, with domestic debt accounting for over 90% of total public debt.

Inflation was an estimated 4.9% in 2017/18, down from 5.3% in 2016/17, due to lower food prices. In April and May 2018, the value of the rand depreciated against most currencies, while the dollar strengthened considerably. The real effective exchange rate of the rand appreciated by 3.3% from March 2017 to March 2018, resulting in loss of competitiveness. Gross gold and foreign reserves reached $51.1 billion in May 2018, covering about 4.4 months of imports.

Real GDP growth is projected to increase to 1.7% in 2018/19 and 2.0% in 2019/20. The drought has improved in most provinces, and prospects in the agricultural sector are favorable. However, growth in industry and services is expected to remain sluggish.

Tailwinds and headwinds

South Africa depends heavily on exports of mineral resources, and although commodity prices increased markedly in the second quarter of 2018, the outlook is on the downside, especially because of expected weakening of global growth due to ongoing trade tensions.

The government recognizes the need to improve the electricity supply. In 2018, South Africa signed longdelayed renewable energy contracts worth 55.92 billion rand with independent renewable power producers. This cleared uncertainty on the energy sector reform introduced in 2011 that permitted private participation in electricity generation. Over 80% of South Africa’s electricity comes from coal, while renewable energy accounts for only about 7% of total generation capacity. The government aims to reduce the share of coal in the energy mix to 48% by 2030.

To put in place measures for fair and equitable land reform that will increase agricultural output and build self-sufficiency in food production, the parliament endorsed in December 2018 a constitutional amendment allowing land expropriation without compensation.

While South Africa enjoys well-functioning democratic institutions, the country faces governance challenges in procuring public goods and services and in managing state-owned enterprises. The low competition in goods and services markets and skills shortages are among the key structural bottlenecks hindering growth. Structural reforms in these areas would help reignite growth and foster social inclusion. South Africa’s regional integration policy is often seen as inward looking, focusing more on domestic industrial development. It could gain from devising regional integration policies that accommodate the needs of its various neighbors, which would promote regional value chains.

Source: African Economic Outlook 2019

Fixed Income


The government securities yield curve extended to 35 years. 

Issuance strategy 

In the domestic bond market, fixed-rate bonds remain the key funding instrument for government, accounting for 80% of domestic long-term loan financing, with the remaining 20% consisting of ILBs. Fixed-rate bond and inflation-linked bond auctions are conducted on a weekly basis in line with a pre-determined auction calendar (fixed-rate bonds on Tuesdays and inflation-linked bonds on Fridays). In the international bond market, the National Treasury plans to issue USD1 billion equivalent. Timing will depend on conducive market conditions, which will enable favorable pricing. 

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

The three rating agencies, S&P, Moody’s, Fitch gave South African sovereign bonds ratings of BBB, Baa1 and BBB respectively

Rating Agency

Current Rating











Standard & Poor’    




List of primary dealers

The primary dealers authorized by the NT are: 

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