Africa-Press – South-Africa. South Africa’s credit rating has hit rock bottom, with the country’s improving financial health likely to result in several ratings upgrades in the coming two years.
This marks the end of the country’s “meltdown” period, where its credit rating plummeted from investment grade to three notches deep into junk status. The country’s credit rating has hovered at this level, of BB-, since 2020.
However, in November 2025, S&P Global upgraded South Africa’s credit rating and maintained its positive outlook on the back of improvements in the government’s financial health.
The predicted deterioration in the government’s debt-to-GDP ratio and other key metrics from ratings agencies when placing South Africa into junk status has not materialised.
South Africa’s government has also posted consecutive primary budget surpluses, with its debt-to-GDP ratio expected to peak in the current financial year.
If this continues and is coupled with faster economic growth, Standard Bank chief economist Goolam Ballim explained that the country can expect a further ratings upgrade and potentially reach investment grade once again.
While the next upgrades are likely to come within the next two years, a return to investment grade will require concrete evidence of improved government financial health and faster growth.
Currently, South Africa’s improvements indicate it is on the right path to achieve those targets. Now, it has to walk the talk and do the hard yards.
“I just identify the sovereign credit rating as one milestone that we cheered last year. Perhaps it is one enveloping milestone to the extent that it encapsulates public finances, growth dynamics, and social stability,” Ballim said.
“A credit rating is the scorecard in terms of confidence in South Africa’s ability to execute in terms of public finance management, economic growth, and at least to see directional improvements in socio-economic status.”
South Africa has made progress on these three fronts, and the credit rating upgrade is based on evidence of that. Importantly, it appears that this improvement will continue.
“The credit rating upgrade was justified in our view. We think that over the next two years, South Africa could experience further ratings upgrades,” Ballim said.
“They are not going to come hurriedly or immediately, but certainly positive outlooks among ratings agencies regarding South Africa come with the hint of further upgrades within the next 24 months.”
Ballim cautioned that a major threat to this is South Africa’s political environment, which consistently bedevils the country’s attempts at stability and attracting investment.
The key issues that rating agencies are watching is the stability of South Africa’s Government of National Unity (GNU) and its progress on implementing the reform agenda.
Source: Standard Bank, Goolam Ballim
South Africa’s meltup and meltdown
The expected improvement in South Africa’s credit ratings indicates some potential for a period similar to the late 1990s and early 2000s.
During this period, South Africa’s credit rating improved markedly as it avoided bankruptcy and implemented growth-enhancing reforms.
This created a positive flywheel, where improving credit ratings resulted in increased investment in South Africa, boosting its economy and state finances, resulting in further upgrades.
However, this was not to last, with the country’s fortunes changing markedly after 2008 when significant political change occurred with the rise of Jacob Zuma.
Ballim explained that South Africa’s credit rating, which encapsulates assumptions about economic growth and state finances, is closely correlated with the country’s political climate.
As South Africa’s political climate becomes less risky, investment flows into the country and boosts the economy. When the political climate becomes increasingly risky, the opposite occurs.
This is what happened in the period after 2008, with Zuma rising to power and replacing Trevor Manuel as Finance Minister with Pravin Gordhan.
Apart from this marking the beginning of State Capture, it also marked a shift in fiscal policy from the government, with spending skyrocketing.
While this is not a problem in itself, the surge in spending did not come with faster economic growth, resulting in South Africa’s debt-to-GDP ratio spiking.
“After ascending in the late 1990s and early 2000s, alongside a period of generous stability before the Global Financial Crisis, we are all aware of the meltdown that followed,” Ballim said.
“In footballing parlance, we fell from being in the first division and on the cusp of ascending to the Premier League of A-rated nations all the way to junk status.”
Undoing this meltdown will take tremendous work from the government, with it having to continue implementing its reform agenda and shoring up state finances.
This is somewhat painful, as the process of fiscal consolidation caps spending growth at or below inflation, while increasing tax revenue. In effect, taxpayers pay more for less.
Outside of this, South Africa’s major state-owned enterprises, such as Eskom and Transnet, need to show they are self-reliant and do not depend on the state for further bailouts.
This will have to be coupled with faster economic growth, which will boost state revenue and improve its debt-to-GDP ratio.
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