In a significant boost for South Africa’s economic prospects, S&P Global Ratings has raised the country’s long-term foreign currency sovereign credit rating to BB from BB-, marking the first such improvement in twenty years, according to a statement from the agency as reported by Reuters. This move elevates the rating to two notches below investment grade and aligns S&P’s view with that of Moody’s for the first time in several years. The local currency long-term rating has also been increased to BB+ from BB, while the positive outlook has been retained, signalling potential for further advances if reforms maintain their pace.
The decision comes in the wake of the recent medium-term budget policy statement, which highlighted stronger-than-anticipated tax collections and a commitment to fiscal discipline, as well as South Africa’s removal from the Financial Action Task Force grey list in October 2025. Analysts note that this delisting, achieved after addressing deficiencies in anti-money laundering measures, is expected to ease compliance burdens on banks and enhance investor confidence.
S&P highlighted South Africa’s improving growth trajectory and public finances, bolstered by diminishing risks from state-owned enterprises. Notably, the power utility Eskom recorded its first annual profit in eight years for the financial period ending March 2025, reducing the need for government bailouts, as detailed in reports from Bloomberg. Tax revenues have exceeded forecasts, enabling successive primary budget surpluses when expenditure is held in check. The agency anticipates gross domestic product growth reaching 1.1 per cent in 2025, following a modest 0.5 per cent in 2024, and averaging 1.5 per cent annually from 2026 to 2028, driven by ongoing reforms in electricity supply, logistics, and other key sectors.
Efforts under the second phase of Operation Vulindlela have accelerated structural changes, though challenges persist at entities like Transnet, the state-owned rail and ports operator, which continues to face losses despite progress. The relative stability of the government of national unity has supported policy consistency and a calmer political landscape.
Additional factors influencing the upgrade include the medium-term budget’s announcement of a lowered inflation target to 3 per cent, with a narrower tolerance band of one percentage point either side. While this may temper nominal growth in the short term, S&P believes the benefits of reduced borrowing costs and inflation-linked spending will outweigh any drawbacks.
This upgrade represents a pivotal shift after a prolonged period of downgrades starting in 2012, though South Africa remains in sub-investment grade territory. Sustained reform implementation will be essential to regain higher standings. The agency cautioned that the positive outlook could revert to stable if reform momentum falters, resulting in slower growth or wider fiscal deficits, particularly if infrastructure bottlenecks are not resolved or political disruptions emerge.
On the potential downsides, opposition from parties such as uMkhonto weSizwe and the Economic Freedom Front could complicate legislative progress, and any fracture in the governing coalition might introduce less reform-oriented influences. Conversely, faster-than-expected deficit reduction and robust growth could prompt another upgrade.
The National Treasury welcomed the development, emphasising that South Africa stands as one of only three nations worldwide to receive an S&P upgrade in 2025 while retaining a positive outlook. Officials stressed ongoing efforts to bolster public finances and infrastructure investment, which should support stronger growth, lower debt costs, greater confidence, and accelerated employment in the medium term.
With debt-to-GDP ratios stabilising at around 77.9 per cent this financial year and the budget deficit narrowing, these measures underscore a broader turnaround. The rand strengthened in response to the news, reflecting renewed market optimism about South Africa’s path toward greater stability and prosperity.