The report projects that South Africa will record the largest decline in borrowing among African sovereigns in 2026, supported by a narrowing fiscal deficit and increased access to concessional funding.
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South Africa is expected to reduce its borrowing in 2026 even as African sovereign debt issuance rises to an estimated $155 billion, highlighting the country’s relatively stronger fiscal position amid a challenging global environment.
A new report by S&P Global Ratings released on Thursday forecasts that African governments will collectively increase commercial borrowing from $140bn in 2025 to $155bn in 2026. The rise is driven by a combination of maturing debt obligations and persistent fiscal financing needs across the continent.
Despite this broader uptick, S&P said South Africa stands out as one of the few major economies expected to buck the trend. The report projects that South Africa will record the largest decline in borrowing among African sovereigns in 2026, supported by a narrowing fiscal deficit and increased access to concessional funding.
Finance Minister Enoch Godongwana last month said South Africa's debt is expected to peak this year for the first time in 17 years and then enter a sustained downward trajectory, underpinned by a disciplined fiscal strategy and structural reforms.
The country’s maturity profile is also expected to remain stable, with debt repayments sitting just under $6bn, suggesting a more manageable refinancing burden compared to many of its peers.
South Africa remains one of Africa’s three largest sovereign borrowers, alongside Egypt and Morocco, largely due to its relatively advanced financial system and long-standing access to capital markets.
According to the report, South Africa benefits from a deep domestic financial sector, an actively traded currency, and a well-developed yield curve. These structural strengths provide the government with greater fiscal flexibility and more reliable access to both domestic and international funding.
In contrast, many smaller African economies face tighter borrowing conditions due to limited domestic savings, shallow banking systems, and higher reliance on foreign currency debt.
Across the continent, total commercial sovereign debt is expected to exceed $1.2 trillion by the end of 2026, equivalent to about 45% of GDP. While this remains moderate by global standards, the cost of servicing that debt is significantly higher for African countries due to elevated interest rates and a narrower investor base.
The report notes that the median annual borrowing per African sovereign is just $1.5bn, far smaller than global peers, reflecting both the size of these economies and structural constraints in accessing capital markets.
According to the report, external factors will play a critical role in shaping borrowing conditions in 2026. The ongoing conflict in the Middle East poses a key risk, particularly if it disrupts oil supply routes and drives up fuel prices. S&P warned that this could strain fiscal balances across Africa, especially in countries heavily reliant on fuel imports.
However, there are also supportive dynamics. Improved global liquidity, lower borrowing costs, and a weaker US dollar are expected to ease financing pressures. The report said these conditions could help African governments refinance debt more cheaply and attract foreign investment into local bond markets.
For South Africa, these global tailwinds—combined with domestic fiscal consolidation—could further strengthen its relative position among emerging markets.
While South Africa is set to reduce borrowing, other major economies are moving in the opposite direction. Egypt is expected to lead the increase, with borrowing projected to reach around $50bn in 2026, driven by a widening fiscal deficit and high refinancing needs.
Meanwhile, countries such as Senegal and Ghana are expected to rely more heavily on domestic and short-term debt, reflecting tighter access to concessional funding and ongoing fiscal pressures.
The divergence underscores a broader theme: Africa’s sovereign debt landscape is becoming increasingly uneven. Countries with stronger institutions, deeper financial markets, and credible fiscal frameworks—such as South Africa—are better positioned to navigate rising global uncertainty.
While South Africa’s projected decline in borrowing offers a positive signal, the broader regional picture remains complex. High debt costs, exposure to external shocks, and structural financing constraints continue to weigh on many African economies.
Even so, the continent’s ability to maintain steady access to funding—supported by improving global conditions—suggests cautious optimism for 2026.
For South Africa, the challenge will be to sustain fiscal discipline and leverage its financial strengths to support growth, while avoiding the debt vulnerabilities that continue to trouble much of the region.
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