Please see the below article from EPIC Investment Partners detailing their discussions on Politics and foreign assets driving South Africa’s rebound. Received this afternoon 09/12/2025.
For much of the past decade South Africa seemed stuck in a slow-burn deterioration, reliant on patches rather than progress. As 2025 draws to a close, the mood has shifted. The country is no longer clinging to stability; it is beginning to rebuild it. Two forces sit at the heart of this change: a marked improvement in South Africa’s net foreign assets and a steadier political landscape under the Government of National Unity. Together, they have provided a degree of resilience that is starting to reshape investor expectations.
Net foreign assets seldom receive the prominence they deserve, yet they have become one of the economy’s most reliable sources of strength. For decades after 1970 South Africa lived with a structurally weak external balance sheet. Foreign liabilities exceeded foreign assets through apartheid, the democratic transition and well into the 2000s, leaving the country viewed, rightly, as highly exposed to shifts in global liquidity.
The picture began to change around 2015. A gradual strengthening of the external position accelerated, and by 2020 South Africa held net foreign assets worth more than a quarter of GDP. Those levels have largely been maintained. By 2025 NFA stood at record highs in rand terms, placing the country close to what analysts describe as a five-star external profile. Historically, sovereigns with this degree of external strength tend to receive credit upgrades, making a return to investment-grade status a plausible and increasingly likely outcome rather than a distant hope.
A stronger external balance matters because it alters how an economy absorbs shocks. Countries burdened with large foreign liabilities often struggle when global rates rise or risk appetite fades: currencies weaken, and capital flows reverse. South Africa’s position now works in the opposite direction. A weaker rand lifts the local currency value of foreign assets held by pension funds, insurers and corporates, offsetting external liabilities. The national balance sheet acts as a natural hedge, reducing the likelihood of the familiar emerging-market cycle of currency pressure and funding strain. This structural shift helps explain why the country has weathered tighter global conditions without experiencing an external squeeze.
The political backdrop has added its own support. When the Government of National Unity formed after the 2024 election, expectations were muted. Instead, the arrangement has delivered a more predictable policy environment than anticipated. Fiscal pressures have been contained, and the Treasury has been able to keep consolidation on track. These factors, combined with stronger external metrics, underpinned the recent sovereign upgrade by S&P from BB- to BB. With a third consecutive primary surplus expected in 2025/26, South Africa’s credit trajectory looks more resilient than at any point in recent years.
Improving confidence is beginning to surface in household sentiment. Consumer confidence remains negative but is at its highest in a year. Load shedding has been absent for more than 200 days following reforms in the energy sector. Inflation has eased enough to allow interest rate cuts, while a firmer rand has reduced the cost of fuel and imported goods. These gains look fragile but represent a notable improvement in day-to-day conditions.
The real economy, however, has further to travel. Growth of around 1.1 per cent in 2025 will not markedly reduce unemployment or poverty, and investment that raises productivity remains limited. Yet the foundations of stability are firmer than they have been for many years. The strength of South Africa’s net foreign assets signals a structural realignment: countries with this level of external resilience typically regain credit standing over time. If the political centre holds and fiscal discipline is maintained, an eventual return to investment-grade status looks not only credible but increasingly probable.
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Alex Clare
09/12/2025