South Africa's public finances are delivering a rare bit of good news. Company tax is flowing in faster than the government budgeted for, driven largely by a boom in mining exports, and the windfall has caught the eye of Goldman Sachs, which now expects the country to earn back-to-back upgrades to its credit score.
The numbers behind the optimism
National Treasury data for June showed corporate tax collections up about 5.5% to R385 billion on a semi-annualised basis. That is comfortably ahead of both the R345 billion collected in the 2025-26 fiscal year and the R364 billion pencilled into February's budget. The figure, released this week, owes much to mining-industry export profits, the standout driver behind the revenue beat. Goldman economist Andrew Matheny wrote in a note that the continued strength in the fiscal data reinforces his expectation that both Moody's and S&P will upgrade their credit ratings over the next year. The country also posted a better-than-expected primary budget surplus, the balance before interest payments, of 1.1% of GDP in the year to March, ahead of Treasury's own 0.9% forecast. As the continent's biggest economy, South Africa has made significant progress in stabilising its public finances, with improving fiscal metrics reinforcing confidence in the government's consolidation efforts.
Climbing out of junk
South Africa is already on the way up. S&P raised its rating last November for the first time in two decades, and Moody's, which pegs the country at Ba2, lifted its outlook to positive from stable in May, citing an improved fiscal position, a commitment to stabilising state finances and progress on reforms. A further S&P move would take the rating to BB+ from BB. Matheny argues investors have not fully priced this in, leaving room in South African government bonds where, in his view, current pricing does not reflect expectations for a credit-rating upgrade.
The forecast is a bank's view, not a done deal. For a country long used to downgrades, the real question is whether the mining windfall and spending discipline can hold long enough to turn a hopeful call into an actual upgrade.
