{"id":839412,"date":"2025-10-08T15:26:37","date_gmt":"2025-10-08T13:26:37","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=839412"},"modified":"2025-10-08T15:26:43","modified_gmt":"2025-10-08T13:26:43","slug":"big-turn-for-south-africa-is-on-the-table","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business-opinion\/839412\/big-turn-for-south-africa-is-on-the-table\/","title":{"rendered":"Big turn for South Africa is on the table"},"content":{"rendered":"\n

South Africa could soon see a credit rating upgrade amid significant improvements in the state\u2019s finances\u2014even if escaping junk status will require patience.\u00a0<\/p>\n\n\n\n

South Africa lost its investment grade rating in 2017 at Fitch and S&P, while fellow ratings agency Moody\u2019s followed in 2020. <\/p>\n\n\n\n

Tatonga Rusike, Chief Sub-Saharan Africa Economist at Bank of America, said that many reasons led to the downgrade. <\/p>\n\n\n\n

This includes governance weaknesses, lack of reforms leading to negative per capita growth performance and deteriorating public finances. <\/p>\n\n\n\n

The nation fell further into non-investment grade territory in 2020, with a rating of BB- at both Fitch and S&P, and a slightly better Ba2 at Moody’s. <\/p>\n\n\n\n

Although a return to investment grade would be an incredibly challenging task in the near term, Rusike noted that ratings upgrades may start next year, marking a turn in the trend for the country.\u00a0<\/p>\n\n\n\n

\u201cOur best-case scenario would be two-notch upgrades at Fitch and S&P and one notch at Moody’s within three or four years<\/strong>, taking us to the 2029 election,\u201d he added.\u00a0<\/p>\n\n\n\n

\u201cAnother smooth transition in 2029 could strengthen governance and reform momentum, laying the path for a return to investment grade.\u201d <\/p>\n\n\n\n

He noted that a near-term fiscal improvement could herald the start of an upward trend in ratings trajectory. <\/p>\n\n\n\n

Higher GDP growth could provide more upgrades, even if it is not yet good enough for an investment-grade level. <\/p>\n\n\n\n

Rusike noted that South Africa could post its lowest central budget fiscal deficit since 2016. Bank of America sees the budget deficit at 4.1% of GDP, far better than the baseline of 4.6%<\/p>\n\n\n\n

\u201c<\/strong>The country has a firm grip on expenditure, and the pace of revenue collection is high, suggesting fiscal improvements. The Mid-Term Budget on November 12 should confirm this.\u201d <\/p>\n\n\n\n

\u201cThe fiscal outlook is even more positive from 2026, once Eskom financing is largely completed and headline deficits of <4% of GDP support large primary surpluses that should put debt to GDP back on a downward trend.\u201d <\/p>\n\n\n\n

Although GDP growth has disappointed in 2025 at around 1%, Bank of America believes that a catch-up is likely in the medium term. <\/p>\n\n\n\n

\u201cEconomic reforms are encouraging, and financial markets appear to view South Africa favourably.\u201d <\/p>\n\n\n\n

\u201cBond yields are lower and credit default swap spreads are at their tightest levels since pre-pandemic, responding to an improving Eskom, Transnet private participation, SARB’s move to a 3% target and likely fiscal improvements.\u201d <\/p>\n\n\n\n

Who will be first <\/h2>\n\n\n
\n
\"\"<\/a>
Tatonga Rusike, Chief Sub-Saharan Africa Economist at Bank of America<\/figcaption><\/figure><\/div>\n\n\n

With Fitch already completing its 2025 reviews, Moody\u2019s and S&P need to issue reports before the year’s end and could find enough support to consider upward adjustments.\u00a0<\/p>\n\n\n\n

Bank of America believes that S&P is likely to be the first mover after coming close to upgrading South Africa in 2023. <\/p>\n\n\n\n

The ratings agency pulled back from an upgrade in early 2023 following a disappointing Q4 2022 GDP contraction, while 2023 was dominated by high levels of load shedding. <\/p>\n\n\n\n

However, S&P moved to a positive outlook in November 2024, and outlooks for non-investment-grade countries can be resolved within a year. <\/p>\n\n\n\n

\u201cThere is room to wait if there are good reasons to convert that positive outlook to an upgrade,\u201d said Rusike. <\/p>\n\n\n\n

\u201cIn our view, higher GDP growth is not yet one of those reasons, but likely fiscal improvements could nudge them toward an upward move.\u201d <\/p>\n\n\n\n

S&P\u2019s next review is scheduled for November 14, 2025, but it may choose to wait another six months to upgrade South Africa. Other rating agencies may follow suit from 2026. <\/p>\n\n\n\n

Regarding the nation\u2019s economy, Bank of America expects South Africa\u2019s GDP to grow by a relatively optimistic 1.2% in 2025, 1.4% in 2026 and over 1.5% from 2027. <\/p>\n\n\n\n

Near-term GDP growth improvements are benefiting from an increase in consumption, while the Bank of America\u2019s medium-term forecasts are still conservative amid a lack of investment. <\/p>\n\n\n\n

\u201cNear-term GDP growth improvements are benefiting mainly from an increase in consumption. Our medium-term forecasts are still conservative – we need to see an investment uptick to be more bullish.<\/p>\n\n\n\n

\u201cWith fewer power cuts, energy shortages have been reduced, while logistics bottlenecks and other reforms are a work in progress.\u201d<\/p>\n\n\n\n

\u201cEconomic growth forecasts are looking up. Transnet is moving ahead with private participation on the rail and ports network, while Eskom has turned a profit for the first time in eight years.\u201d<\/p>\n\n\n\n

On the other hand, Moody’s is more bearish on Africa relative to peers and is less likely to move fast into investment grade.<\/p>\n\n\n

\n
\"\"<\/a><\/figure><\/div>\n\n\n
\n","protected":false},"excerpt":{"rendered":"

Bank of America believes that South Africa is on the right track to escape junk status, with upgrades potentially beginning this year. <\/p>\n","protected":false},"author":95,"featured_media":819516,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[5349,1164,2510,1512,2138],"class_list":["post-839412","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-opinion","tag-bank-of-america","tag-eskom","tag-fitch","tag-moodys","tag-transnet"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/839412","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=839412"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/839412\/revisions"}],"predecessor-version":[{"id":839417,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/839412\/revisions\/839417"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/819516"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=839412"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=839412"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=839412"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}