End of the Meltdown: Why SA’s Credit Rating Is Finally Headed Back Up

For the better part of a decade, South Africa’s credit rating has been a national embarrassmenta three-notch-deep junk status that symbolised fiscal decay, political dysfunction, and lost economic potential. But the tide is turning. After hitting rock bottom, the country’s financial health is showing genuine signs of recovery, and analysts now predict a series of ratings upgrades over the next two years.

In November 2025, S&P Global upgraded South Africa’s credit rating and maintained a positive outlookthe first meaningful upward movement since the country plunged into sub-investment grade in 2020. The agency cited tangible improvements in government finances, including consecutive primary budget surpluses and a debt-to-GDP ratio expected to peak in the current financial year.

“The predicted deterioration has not materialised,” said Goolam Ballim, chief economist at Standard Bank. “The credit rating upgrade was justified in our view. We think that over the next two years, South Africa could experience further ratings upgrades.”

From Meltdown to Melt-Up

South Africa’s credit trajectory tells a story of dramatic swings. In the late 1990s and early 2000s, the country enjoyed a sustained upgrade cycle, climbing toward investment-grade status on the back of prudent fiscal management and growth-enhancing reforms. But the post-2008 period, marked by the rise of Jacob Zuma and the onset of state capture, reversed those gains. Spending skyrocketed without corresponding growth, debt spiralled, and by 2020, the country was mired in junk territory.

“In footballing parlance, we fell from being in the first division and on the cusp of ascending to the Premier League of A-rated nations all the way to junk status,” Ballim observed.

Now, the long climb back begins.

What the Upgrades Depend On

Ballim identified three pillars that rating agencies are watching closely:

1. Fiscal consolidation: The government must continue capping spending growth at or below inflation while increasing revenue. This is politically painfultaxpayers paying more for lessbut essential for stabilising debt.

2. GNU stability: The Government of National Unity’s ability to cohere around a reform agenda is under constant scrutiny. Political fragmentation remains the single biggest threat to investor confidence.

3. SOE independence: Major state-owned enterprises like Eskom and Transnet must demonstrate they can operate without further bailouts. Self-reliance, not state rescue, is the new benchmark.

The Path Back to Investment Grade

Returning to investment grade will take time. Ballim expects further upgrades within 24 months, but a full restoration of investment-grade status requires “concrete evidence” of sustained fiscal health and faster economic growth.

“A credit rating is the scorecard in terms of confidence in South Africa’s ability to execute in terms of public finance management, economic growth, and at least to see directional improvements in socio-economic status,” he said.

The good news is that the directional improvements are visible. The reform agenda is advancing, the GNU has held together longer than many predicted, and the fiscal arithmetic is slowly improving. The question is whether the government can “walk the talk and do the hard yards”maintaining discipline through an election cycle, managing coalition tensions, and delivering growth that outpaces population increases.

A Window of Opportunity

South Africa’s “meltdown” period may finally be ending. The country is not out of the woodsfar from it. But the credit rating upgrade is more than a technical adjustment. It is a signal that international markets are beginning to believe again. If the government can sustain this momentum, the next few years could see the return of a positive flywheel: better ratings attract investment, investment boosts growth, growth improves state finances, and further upgrades follow.

That was the story of the late 1990s. For the first time in a decade, it looks like a story that could repeat itself.

{Source: DailyInvestor}

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