S&P Global did not downgrade South Africa from positive to stable, which is good news for the country.
Ratings agency, S&P Global, has kept its credit rating for South Africa on a positive outlook, saying it reflects the potential for stronger growth than currently expected.
This is despite trade-and-tariff-related headwinds alongside national debt consolidation if the government of national unity (GNU) can accelerate economic and fiscal reforms, while addressing infrastructure pressures.
The agency said on Friday that it expects South Africa’s gross domestic product (GDP) growth will increase to an average of 1.5% from 2025 to 2028 after subdued growth of 0.6% in 2024.
However, ongoing logistical bottlenecks and global tariff-related pressures will constrain economic activity.
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S&P noted that despite the disagreements with coalition partners around hiking value-added tax (VAT), the GNU managed to remain intact and the agency believes this bodes well for broad policy continuity and enhanced reform momentum.
“Despite the re-tabling of the budget and the likely removal of the VAT increase, the government plans to continue with fiscal consolidation and fiscal financing benefits from access to deep domestic markets and an actively traded currency.
“We have, therefore, affirmed our ‘BB-/B’ foreign currency and ‘BB/B’ local currency long and short-term ratings for South Africa. The outlook remains positive,” S&P said in a statement.
S&P Global could raise or drop ratings for these reasons
S&P said it could raise the ratings if an improving track record of effective reforms resulted in the strengthening of economic growth as well as reduced government debt and contingent liabilities, but also revise the outlook from positive to stable if ongoing economic and governance reforms do not progress.
This will result in a deterioration in economic growth or higher-than-expected fiscal financing needs and interest burden for example, due to worsening constraints from critical infrastructure.
“The ratings on South Africa benefit from the country’s sizable and sophisticated financial system that provides a deep funding base for the government.
“The country also has relatively strong institutions, with good checks and balances, particularly its central bank, the South African Reserve Bank [Sarb].
“The ratings are constrained by relatively low GDP per capita and low GDP growth rates, as well as sizable fiscal deficits and high government debt.”
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S&P Global expects GDP to pick up slightly
S&P expects that South Africa’s real GDP growth will pick up slightly to 1.3% this year from 0.6% in 2024, as more private sector-driven electricity supply comes onstream and last year’s drought was not repeated.
However, the agency points out that growth will be limited by potential US tariffs and global tariff-related risks, through direct and secondary effects, such as slowing demand from China for key commodities.
“We forecast a slight rebound in growth from 2024 levels, but lower than our November forecast of 1.5% on average over 2026-2028, partly supported by likely lower interest rates, as well as the recent establishment of a two-pot retirement system that allows people to partially withdraw funds from their retirement accounts, which could boost consumption.
“Nevertheless, given population growth, we still forecast per capita GDP growth to be less than 0.5% and insufficient to materially raise living standards or reduce unemployment, which stands at 33%.
“Our GDP growth projections over 2025-2027, averaging 1.4%, are slightly lower than the government’s of an average of 1.7%, largely due to our less-supportive view on investment.”
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S&P Global warns about US relations and government debt
Furthermore, S&P highlighted that over and above tariffs, South Africa’s diplomatic relations with the US have also become more complicated, with the US suspending all aid and bilateral support to South Africa.
The US also welcomed Afrikaners who believe South African government discriminates against them and declared former ambassador to the US, Ebrahim Rasool, persona non-grata.
The ratings agency forecasts gross general government debt to remain high, averaging 80% of GDP in 2025-2028.
“We consider South Africa’s monetary flexibility, the freely floating exchange rate and the country’s deep financial markets significant credit strengths.”
In addition, S&P says it views South Africa’s contingent liabilities as significant.
“The government has provided a stock of guarantees to SOEs worth R663 billion (8.6% of 2025’s GDP) in 2025. Guarantees to Eskom constituted by far the largest part, amounting to R351 billion (53% of total guarantees).
“According to Budget 2025, the government has provided R50 billion in guarantees to Transnet in 2025. However, we expect an additional package of guarantees to be provided soon.”
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Treasury welcomes ratings news from S&P Global
The National Treasury welcomed S&P Global decision to keep the country’s credit ratings unchanged and the outlook positive.
“Government’s growth strategy will continue to focus on maintaining macroeconomic stability to reduce living costs and grow investment, executing reforms to promote a more dynamic economy, building state capability in core functions and supporting growth-enhancing public infrastructure investment.
“The fiscal strategy continues to strike a balance between stabilising the public finances, reducing risks in the fiscal framework, encouraging economic growth and supporting low income and vulnerable households.”
