S&P Global Ratings has raised South Africa’s long-term foreign currency sovereign credit rating to BB from BB-, and its local currency rating to BB+ from BB, with a positive outlook. The upgrade reflects improving fiscal discipline, stronger growth prospects, and progress in state-owned company reforms.
The ratings agency cited the government’s expected third consecutive annual primary surplus in fiscal 2025, ending March 31, 2026, and a reduction in contingent liabilities, particularly linked to the state-owned electricity utility, Eskom. Eskom posted its first profit in eight years, reducing its need for government financial support.
General government revenues are forecast to outperform budgeted numbers for fiscal 2025, despite a downward revision to GDP growth since the May 2025 budget. Stronger-than-expected VAT and corporate income tax receipts, along with high tax buoyancy, contributed to the improved fiscal outlook. S&P projects South Africa’s fiscal deficit will fall to 4.7 percent of GDP in fiscal 2025 and decline further to 3.3 percent by 2028, while net government debt is expected to stand at 75 percent of GDP by 2028.
The ratings agency also highlighted broader reform momentum. The government’s second phase of Operation Vulindlela, launched in 2025, focuses on electricity, local government, digital transformation, visa regimes, spatial inequality, water, and logistics.
Energy sector reforms have sharply reduced load shedding, with no outages reported in the past 170 days. Eskom’s turnaround is a key factor in the ratings improvement, although arrears owed by municipalities remain a risk. Reforms at Transnet, the state-owned rail and port operator, are ongoing, with private operators being shortlisted to assist in running rail routes.
S&P noted that lower inflation targets, revised to 3% (±1 percentage point) by the Ministry of Finance and the South African Reserve Bank (SARB), could constrain nominal GDP growth and revenue collection. However, these effects are expected to be offset by lower borrowing costs and reduced inflation-linked expenditures.
South Africa benefits from a large, sophisticated financial system, a deep funding base, and relatively strong institutions, including an independent central bank. Constraints remain, including low GDP per capita, modest growth rates, and elevated fiscal deficits and debt levels.
The removal of South Africa from the Financial Action Task Force grey list in October 2025 is also expected to boost market confidence and lower compliance costs for banks. Financial sector lending growth is projected at around 8 percent annually through 2028, outpacing nominal GDP growth. Recent rate cuts and eased credit conditions are expected to support household consumption and the mortgage market.
In a regional context, South Africa’s BB rating places it above several Sub-Saharan African peers. Nigeria has a B rating with a negative outlook, Kenya is rated B+ with a stable outlook, and Angola and Ghana are rated B- with positive and stable outlooks, respectively. However, South Africa remains below some of the continent’s stronger sovereigns, including Morocco (BBB-, stable) and Egypt (BB+, stable). Analysts say the upgrade could lower borrowing costs and improve South Africa’s position in global capital markets relative to peers with weaker fiscal and institutional fundamentals.
