South African local-currency government bonds are becoming a top pick for investors seeking an alternative to US Treasuries amid worries about a weaker dollar and rising government debt, according BlackRock.

The yield on the South Africa’s benchmark rand-denominated 2035 bonds is about 8.94% after falling more than 2 percentage points since April. That still represents a premium of almost 5 percentage points over similar-maturity US Treasuries. Inflation in Africa’s most industrialised economy is seen slowing to about 3% by 2027 as the central bank pursues a lower target.

In the US, meanwhile, investors are worried about the widening fiscal deficit and rising debt issuance, which would weigh on Treasury prices, according Ben Powell, BlackRock’s chief Asia-Pacific investment strategist.

“Yields in South Africa look very high — both nominal and real — while inflation is not too bad,” Powell said in an interview in Johannesburg. “If I’m worried about the Treasury market and need diversification, emerging-market local-currency fixed income is absolutely on the list, and South Africa screens well.”

The FTSE/JSE ALBI index, which tracks South African government bonds as well as those of state-owned entities, has returned 27% in dollar terms this year, buoyed by the rand’s gain against the greenback.

Foreign investors added more than R90-billion of South African government bonds this year through September, according to the South African Reserve Bank. The same cannot be said for equities, which have posted $11.3 of outflows in 2025, according to JSE data. The foreign-investor selloff came even as the benchmark index surged 43% in dollar terms, outperforming both the MSCI EM stock index and the S&P 500.

That could change if the country’s coalition government remains stable and delivers on economic reforms, Powell said.

“Capital tends to move slowly, and then all at once,” he said. “If South Africa keeps providing a sense of normalcy and stability, that would be quite encouraging for global investors.”

Sentiment is already improving. Powell cites Amazon.com’s decision to expand its operations into South Africa — including building a large new data center — as a sign of growing confidence. The world’s largest retailer, Walmart has also announced that it is opening its first Walmart branded stores in South Africa this year.

“This is a huge bet by a very sophisticated global technology company,” Powell said of Amazon. “I wouldn’t over-read one investment decision, but it’s noticeable.”

The state-owned power utility, Eskom, has largely stabilised South Africa’s electricity grid after years of intermittent power outages that crimped economic growth. That’s a “significant positive,” Powell said.

“If the lights stay on, the capital will come back,” Powell said.