S&P affirms South Africa’s credit rating, maintains positive outlook

South Africa has received a vote of confidence from S&P Global Ratings, which has affirmed the country’s long-term foreign currency sovereign credit rating at ‘BB’ and its local currency rating at ‘BB+’, while maintaining a positive outlook. The decision reflects growing confidence in the country’s fiscal consolidation efforts and progress on structural reforms, even amid a challenging global economic environment.

According to S&P, South Africa’s economic growth is expected to improve gradually, with real GDP projected to rise to 1.2% in 2026 and average 1.7% between 2027 and 2029. The modest recovery is expected to be supported by reforms in key sectors, particularly electricity, as well as broader efforts to unlock infrastructure and logistics bottlenecks.

The ratings agency also pointed to improving fiscal performance as a key factor underpinning its decision. It noted that government revenue in the 2025/26 fiscal year exceeded budget projections, while the country recorded its third consecutive year of rising primary budget surpluses.

This, combined with stronger tax collection and controlled spending, is expected to drive continued fiscal consolidation through 2029/2030. Over time, this should result in a decline in government debt as a percentage of GDP.

S&P’s positive outlook reflects the potential for further fiscal strengthening and debt stabilisation, provided that the government maintains its current policy trajectory and external pressures, such as elevated energy prices, begin to ease.

Importantly, the agency recognised government’s ability to implement targeted support measures for vulnerable households – including temporary fuel levy relief – without undermining fiscal discipline or deviating from its medium-term consolidation plans.

The agency also highlighted the acceleration of structural reforms under Operation Vulindlela Phase II, which aims to address longstanding constraints in electricity generation, freight logistics, and infrastructure delivery.

These reforms are widely seen as critical to raising South Africa’s growth potential over the medium to long term.

However, S&P cautioned that economic growth is likely to remain subdued in the near term, reflecting global headwinds and tighter financial conditions.

These external pressures continue to weigh on emerging markets, including South Africa, despite improvements in domestic policy management.

The latest affirmation follows S&P’s upgrade of South Africa’s credit rating on November 14 2025, marking the first upgrade by a major ratings agency in more than 16 years.

The decision is also notable in the broader global context, where many sovereign ratings have come under pressure.

Since the outbreak of the current Middle East conflict in late February, 23 sovereign ratings have been negatively affected, including 14 investment-grade economies.

Against this backdrop, South Africa stands out as one of only two G20 countries – alongside Italy – to retain a positive outlook from S&P.

Government has welcomed the decision, reiterating its commitment to prudent fiscal management and structural reform. National Treasury Director-General Duncan Pieterse said the affirmation reflects the progress made in restoring the country’s public finances.

“The affirmation from S&P that government is on track to deliver on its commitment to reduce the debt-to-GDP ratio over the medium term reflects the progress we have made towards restoring the health of South Africa’s public finances, and our ability to continue to do so despite geopolitical upheavals,” Pieterse said.

He added that the alignment of both S&P and Moody’s in maintaining a positive outlook for South Africa sends a strong signal to investors.

“Two of the major rating agencies, S&P and Moody’s, now have South Africa on a positive outlook, which is an encouraging signal that we have the potential to lift our economic growth rate higher and reduce our public debt faster. We are determined to do so,” he said.

Looking ahead, government is working to further strengthen the credibility of its fiscal framework, including the development of a principles-based fiscal anchor aimed at reinforcing long-term sustainability and policy certainty.