In 2017 South African government bonds were cut to ‘junk’ status and then even further in 2020.

Then, in early 2023 our country was ‘grey listed’ by the FATF (Financial Action Task Force).

The media was full of impending doom and gloom, about how bad these events would be for the economy.

Yet we’re still going. Everything hasn’t fallen apart.

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So – has anything changed because of these two events?

The South African Reserve Bank’s most recent Financial Stability Review answers this question for us… 

Looking at this chart you’ll see a breakdown of Local Investors vs offshore investors’ holdings of South African Government Bonds. 

In early 2018 offshore investors held 42% of government bonds, while local investors held 58%. By February 2023 Local investors held 75% of bonds, compared to 25% by offshore investors. 

Simply put – this is proof that both the fact that SA bonds have been rated as junk, and the impending threat and eventual grey listing of South Africa has affected international investor confidence significantly.

But surely it doesn’t matter who holds government debt? 

Well – it doesn’t matter who holds the debt. But it does matter where the money is coming from, and where it is going.

And in this case – if international investors sold their bonds and took their money OUT OF South Africa it is bad.

According to the South African Reserve Bank report there’s been a ‘structural shift’ and that there are ‘concerns about the capacity of South African investors to continue absorbing new issuances of SA government bonds in future’.

This outflow of capital is behind much of the weakness in the rand against the dollar, pound and euro.

A weaker rand means imports cost us more, and that drives inflation.

Higher inflation means higher interest rates…

So, what does this mean for investors, and just normal citizens like you and I?

Well, there’s a couple of things that these factors will continue to push:

  • A weak rand compared to major currencies as capital flows out of South Africa and we see a shortage of foreign direct investment.
  • Imported inflation because of the weak currency. Things like fuel, electronics and cars will remain stubbornly expensive.
  • Higher interest rates for longer. If you thought that an interest rate drop is somewhere in SA’s near future, you are dreaming.

This means that you need to ensure that you invest to protect your spending power as much as possible.

Firstly – you should have investments in offshore stock markets and countries.

There are ways to do this from South Africa either by physically taking your money offshore, or by using local investment vehicles.

Secondly – don’t become over indebted. Make sure you can pay your debt.

Even if interest rates increased another 2-4%, inflation made your monthly groceries more expensive and your salary doesn’t grow in the next two years.


The positives are that the banks and insurance companies in South Africa are well regulated, and they are the cornerstone of the economy. A great deal of work is being done to get South Africa off the grey list.

Similarly, S&P maintained a stable outlook on South Africa.

Considering the long list of things that are wrong with SOEs like Eskom, Transnet, Denel, SAA etc – government literally just has to fix ONE thing and there’ll be positive fiscal improvement, and possible improvements in the country’s credit rating.

But for now – be ready for a rocky ride.

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