The rand and South African bonds rallied on Monday after S P Global Ratings raised its view of the nation to positive from stable - for only the second time in the president's six-year tenure. The move indicated the ratings company's next move may well be an upgrade of the credit grade.
S P's move validates bulls who backed Ramaphosa's government of national unity as the right recipe for carrying out tough reforms needed to pull South Africa out of an economic slowdown, burdensome debt and persistent power crisis. That optimism has already sent the nation to some of the best performances in emerging markets local-currency bonds have given investors 19 returns since the election, dollar bonds have yielded almost 7 and the currency carry trade posted a gain of 5.6.
"S P's change in South Africa's outlook to positive, on the basis that growth could improve from here on, will likely be looked at as a relative turning point for South Africa," said Razia Khan, chief economist for Africa and the Middle East at Standard Chartered.
That is a rare reprieve for Ramaphosa, under whose watch South Africa lost its investment grade in 2020, and the ANC lost its parliamentary majority this year.
Investor confidence in South Africa had already strengthened following the GNU's formation under Ramaphosa in June, Khan said. In addition, S P's ability to focus on potential upsides despite the downbeat news in the medium-term budget policy statement 'signals that rating agencies are rightly focused on the potential upsides ahead", she said.
