SAR has raised the nation's long-term and short-term issuer credit ratings from 'BBB' and 'B' to 'BBB+' and 'B+', respectively, for both foreign and local currencies. The outlook on the long-term rating remains stable.
The upgrade signals optimism about South Africa's ability to stabilise its public finances, particularly as the National Treasury implements fiscal policies to manage debt and curb rising debt-service costs in the medium term.
Speaking to Channel Africa, Zwelibanzi Maziya, Chief Operating Officer of SAR, outlined the key drivers behind the improved rating. He highlighted projected GDP growth of 1.8% between 2025 and 2027, supported by lower inflation rates and an expansionary monetary policy from the SA Reserve Bank. The recent resolution of the country’s electricity shortages has also contributed to the positive outlook.
“SA has come through difficult economic periods, including the COVID-19 pandemic and energy supply challenges. The current economic trajectory suggests continued recovery,” Maziya said.
However, he warned of potential risks that could impact SA’s credit standing in the future. A failure to effectively manage debt could be a significant threat, particularly the growing proportion of foreign currency-denominated debt.
“If external debt continues rising to match domestic debt, this could expose the country to external financial risks,” he explained. Maziya also cautioned that a return to widespread load shedding could negatively impact economic stability.
To maintain and further improve its credit rating, SAR expects the National Treasury to take decisive steps in stabilising public finances.
“We have already noted a slowdown in debt accumulation. Between 2023 and 2024, the debt-to-GDP ratio increased by 1.27%, compared to 2.6% in the previous period. This trend needs to continue,” Maziya added.
Explaining SAR’s unique approach to credit assessments, Maziya pointed out that, unlike global rating agencies, SAR incorporates additional factors such as Africa’s food and mineral resources and infrastructure investment into its evaluations.
--ChannelAfrica--
