A Landmark Leap: S&P Upgrades South Africa for First Time in a Generation

For nearly two decades, the story of South Africa’s sovereign credit rating has been one of steady decline. A long slide that began in 2017 saw the nation locked in ‘junk status,’ a label that hampered investment and became a symbol of economic stagnation. Today, that narrative has officially changed.

In a powerful endorsement of the country’s reform trajectory, S&P Global Ratings has upgraded South Africa’s foreign-currency rating to ‘BB’ from ‘BB-’. This marks the first upgrade from a major ratings agency in almost twenty years, signaling a profound shift in international confidence.

From Fiscal Repair to a Brighter Forecast

The upgrade is not an accident; it is the result of deliberate and difficult work. S&P pointed directly to three key improvements: stronger growth prospects, an improving fiscal outlook, and a reduction in the risks posed by state-owned entities like Eskom.

The National Treasury’s commitment to fiscal discipline is paying off. The recent Medium-Term Budget Policy Statement showed debt stabilising for the first time in years, with the deficit set to narrow. This fiscal consolidation, coupled with revenue collections beating expectations, convinced S&P that South Africa is serious about repairing its finances.

Perhaps most critically, the agency acknowledged the tangible progress at Eskom and in the freight logistics sector. The slow but steady improvement in energy availability and the push to reform Transnet have directly reduced the “contingent liabilities” that long haunted the state’s balance sheet.

A Journey Out of ‘Junk’

The significance of this moment is rooted in the pain of the past. South Africa was first downgraded to sub-investment grade in 2017 following the damaging firing of finance minister Pravin Gordhan, an event that triggered a period of deep policy instability.

To now be moving in the opposite direction is a milestone for the current administration. S&P now expects GDP growth to pick up to 1.1% in 2025 and average 1.5% in the following years, a direct result of a more stable electricity supply and ongoing reforms.

The ‘positive’ outlook affirmed by S&P is the real cause for optimism. It means another upgrade is possible if South Africa stays the course. The nation remains two notches below the coveted ‘investment grade’ status, but for the first time in a generation, it is climbing, not falling. This is more than a statistical adjustment; it is a signal to the world that South Africa is back on the map and open for business.

{Source: cnbcafrica}

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