South Africa Could Be Heading for a Credit Rating Upgrade as Early as November
Finance Minister Enoch Godongwana is expected to signal the country’s commitment to fiscal discipline on Wednesday, 21 October, when he delivers the medium-term budget policy statement. The debt-to-GDP ratio is set to decline for the first time in more than two decades, which could pave the way for a credit-rating upgrade as soon as next month.
What’s expected on Wednesday
Godongwana tables the statement at 14h00 in Cape Town. Economists surveyed by Bloomberg expect National Treasury to beat its consolidated budget-deficit forecast of 4% of GDP for 2026/27, with an estimated shortfall of 3.8%. They also project that Treasury met its goal of stabilising debt in the year through March 2026.
The debt-to-GDP ratio is forecast to fall to 77.5% this fiscal year. That’s slightly slower than Treasury’s own projected drop to 77.3%, but it would still be the first decline in more than two decades.
Upgrade timing: the calendar
Four of the 11 economists surveyed by Bloomberg, including those at Bank of America, Morgan Stanley, BNP Paribas and Old Mutual, expect an upgrade by year-end. The rest see it coming in 2027.
The next reviews are:
- Moody’s and S&P Global Ratings: 27 November
- Fitch Ratings: 11 December
Who is most likely to move?
Tatonga Rusike, BofA’s sub-Saharan Africa economist, sees Moody’s as the most likely agency to act, with a potential upgrade to Ba1, while an S&P upgrade to BB+ is a closer call. Fitch is in no rush after its upgrade in June.
Moody’s said last week that South Africa is on the right track for its first upgrade from the agency since 2009, provided fiscal performance keeps improving. Morgan Stanley expects S&P to raise the rating to BB+ next month and Moody’s to follow in early 2027.
Both Moody’s and S&P have South Africa on a positive outlook. An upgrade by either would lift the country to one notch below investment grade, putting it on the path out of junk status.
The road to investment grade
Investec Wealth & Investment International sees a greater-than-50% chance that South Africa regains investment-grade status within two years, and BofA expects it before 2029.
To get there, rating agencies will want evidence of what Rusike called a durable improvement in fiscal metrics: lower deficits, falling government debt and firmer trend growth.
Why the case is getting stronger
South Africa’s economy has largely withstood the fallout from the wars in Iran and Ukraine, and the government has kept spending in check despite global uncertainty. Together with plans to introduce a fiscal anchor, that resilience is strengthening the case for an upgrade.
Keabetswe Mojapelo, head of economic research at Old Mutual, said public finances are in order. She called the country’s ability to weather this shock fiscally “unprecedented”, since shocks like this normally leave South Africa worse off. With two agencies on a positive outlook, she doesn’t see how the fiscal position gets worse, even in managing windfalls.
What it could mean for you
An upgrade would lower the risk premium investors demand on South African debt, which can ease government borrowing costs over time. That can support the rand and, eventually, the broader economy. The effects are gradual, though, and an upgrade wouldn’t directly cut fuel prices or interest rates.
The bottom line
Wednesday’s budget statement is the first test, and 27 November the first date that matters. An upgrade next month isn’t guaranteed, since most economists surveyed expect 2027, but the direction of travel is clearly positive.
Source: Bloomberg survey and commentary from BofA, Morgan Stanley, Old Mutual, Moody’s and Investec, as reported in the original article.
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