South Africa is facing a dangerous convergence of political instability and external economic shocks that could threaten the reform momentum behind its recent credit-rating upgrade, according to S&P Global Ratings.

The warning comes at a particularly fragile moment for Africa’s most industrialized economy, where investors are increasingly weighing whether the governing alliance can maintain political cohesion long enough to push through fiscal and structural reforms while simultaneously confronting surging oil prices, elevated global borrowing costs, and mounting domestic political pressure.

South Africa’s Constitutional Court on Friday cleared the way for an impeachment hearing into Ramaphosa’s conduct in the Phala Phala scandal, reviving one of the most politically damaging controversies of his presidency. The scandal centers on the theft of approximately $580,000 in cash reportedly hidden inside furniture at Ramaphosa’s Phala Phala game farm, a case that has fueled years of allegations surrounding accountability, transparency, and abuse of state institutions.

The court’s decision followed findings by an independent panel that concluded the president had a case to answer, significantly escalating political uncertainty around a leader long viewed by investors as central to South Africa’s reform agenda.

The development has intensified pressure on the coalition government formed after the African National Congress lost its parliamentary majority for the first time since the end of apartheid.

Markets and ratings agencies are now increasingly focused on whether the coalition can survive mounting internal tensions while sustaining economic reforms that helped stabilize investor sentiment after years of fiscal deterioration, power shortages, and weak growth.

Samira Mensah, head of analytics and research for Africa at S&P Global Ratings, told Reuters the agency is closely monitoring “the strength of that coalition, the stability of the coalition to be able to carry on reforms and support the momentum.”

That momentum had only recently begun to improve. In November, S&P upgraded South Africa’s credit rating for the first time in two decades, citing signs of a strengthening fiscal trajectory, modest growth improvement, and progress on reforms aimed at stabilizing the country’s electricity sector and public finances.

The upgrade marked a symbolic turning point for a country that had spent years battling downgrades tied to corruption scandals, weak state institutions, and persistent economic stagnation.

Ramaphosa’s administration had attempted to present itself as restoring credibility after the state-capture era associated with former president Jacob Zuma. Investors viewed efforts to overhaul state-owned enterprises, improve tax collection, and address the energy crisis as evidence that South Africa was gradually regaining policy discipline.

But the latest political turmoil threatens to complicate that narrative.

Middle East Turmoil Brings Energy Crisis into the Equation

The impeachment process arrives as South Africa is also confronting increasingly hostile external conditions tied to the conflict in the Middle East, which has pushed global oil prices sharply higher and increased fears of renewed inflationary pressure across emerging markets.

For South Africa, the risks are particularly acute because the country remains heavily dependent on imported fuel while already carrying one of the highest debt-servicing burdens among major emerging economies.

S&P noted that African sovereigns spend, on average, roughly 17% of government revenues on interest payments, compared with a global median of around 5.5%. That disparity illustrates how vulnerable many African economies remain to higher global interest rates and commodity-price shocks.

With borrowing costs already elevated, governments have limited room to absorb additional external pressure through subsidies or fiscal stimulus without worsening debt dynamics. Mensah warned that prolonged conflict and sustained increases in fuel prices could undermine politically sensitive reforms implemented across several African economies in recent years.

“Governments that have recently removed fuel subsidies face political pressure to reverse those reforms the longer the conflict continues,” she said.

That warning carries particular significance across Africa, where fuel subsidy removals have triggered social unrest, inflation spikes, and political backlash in multiple countries. The issue is especially sensitive because many governments removed subsidies under pressure from international lenders and investors seeking fiscal consolidation.

Reversing those policies could widen deficits and weaken confidence in reform programs, while maintaining them amid rising living costs risks intensifying public anger. S&P said more than three-quarters of rated African sovereigns are net importers of fuel and fertilizer, leaving countries such as Egypt, Mozambique, and Rwanda especially exposed to price shocks linked to the Middle East conflict.

Commodity exporters such as Nigeria and Angola are comparatively better positioned because higher crude prices can strengthen export earnings and government revenues, though both countries still face domestic inflationary pressures and currency challenges.

South Africa occupies a more complicated middle ground. While the country benefits from deep financial markets and sophisticated institutions relative to many regional peers, it remains constrained by weak growth, chronic electricity shortages, high unemployment, and deteriorating public infrastructure.

Political instability now risks compounding those structural problems at a moment when global investors are becoming increasingly selective toward emerging markets.

The uncertainty surrounding Ramaphosa also matters because he has long been regarded by international investors as a relatively market-friendly figure capable of balancing reform commitments against competing political pressures inside the ruling ANC. Any weakening of his authority could raise concerns about the pace of economic reforms, fiscal discipline, and the government’s ability to manage relations within the coalition.

The broader concern for ratings agencies is not simply whether South Africa faces short-term volatility, but whether the political system can sustain policy continuity during a period of mounting external stress.