South Africa’s credit rating has been kept at ‘BB-‘ with a stable outlook by two of the world’s major credit rating agencies — Fitch Ratings and S&P Global Ratings. This decision shows that while South Africa still faces serious economic issues, there is some cautious hope about its future direction.
In September 2024, Fitch Ratings decided to retain South Africa’s long-term debt rating at ‘BB-‘. According to the agency, this was based on a few positives, including the country’s good debt structure, strong financial institutions, and a solid monetary policy system. These elements, Fitch said, continue to give some confidence in the country’s ability to manage its economy. However, they also warned about the downside. Fitch pointed to low real GDP growth, high levels of poverty and inequality, and a difficult fiscal structure that makes it hard for the government to reduce budget deficits.
S&P Global Ratings followed up in November 2024 with a similar update. While it kept South Africa at the same ‘BB-/B’ rating for foreign currency and ‘BB/B’ for local currency, it slightly improved the country’s outlook from stable to positive. S&P said it made that move because of signs that the new coalition government could bring in more private investment and push economic reforms faster.
The change in outlook followed a historic political shift in South Africa. For the first time in 30 years, the African National Congress (ANC) lost its majority in parliament. This led to the formation of a unity government between the ANC and the Democratic Alliance (DA), along with nine other smaller political parties. This move seems to have restored some investor confidence.
Business response has been encouraging. Government borrowing rates dropped by 10%, showing investors now see less risk in lending to South Africa. The Johannesburg Stock Exchange also went up by 6.5%, and the country’s currency showed some strength. Analysts say these are early signs that things might be turning around, even if slowly. Power supply is more stable, and government institutions are said to be responding better to national needs.
Still, South Africa remains in what experts call “junk” status. This means its credit rating is still below investment grade. Fitch and S&P both rate it three notches below investment grade, while Moody’s gives it a slightly better score of two notches below, at ‘Ba2’. These ratings make it more expensive and difficult for the country to borrow money internationally.
Analysts are warning that South Africa still has a long way to go before it can escape junk status. The government expects the economy to grow only 1.1% this year, which is low compared to other emerging economies. The country’s debt-to-GDP ratio has climbed from 23.6% in 2009 to a high 74.1% in 2024. Most experts agree that South Africa would need to maintain steady growth of about 2% and keep its debt under control to see any further improvement in its credit rating. Until then, the country will continue to face tough questions about its economic direction.
