South Africa has secured its first sovereign credit rating upgrade in almost 20 years after S&P Global lifted the country’s foreign-currency long-term rating to “BB” from “BB-”, marking a milestone in a reform drive aimed at stabilizing public finances and hauling the economy out of years of sluggish growth.
The upgrade, announced on Friday, comes after the ratings agency cited stronger growth prospects, an improving fiscal outlook and reduced contingent liabilities. Those improvements are tied in large part to better performance at Eskom, the state-owned power utility whose operational failures and heavy debt load have long weighed on the country’s ratings.
The National Treasury has spent the past several years pushing to slow the rise in public debt and restore fiscal credibility after a long period of deterioration. The mid-term budget review published recently showed the country’s debt-to-GDP ratio stabilizing at 77.9% this financial year, with the budget deficit expected to narrow to 4.7% of GDP in 2025/26. That is an improvement from the 4.8% deficit projected in the May budget, signaling momentum behind efforts to pull the country onto a more sustainable path.
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S&P said it expects South Africa’s GDP growth to rise to 1.1% in 2025 after a weak 0.5% in 2024, and to average about 1.5% between 2026 and 2028 as electricity supply improves and other sectors begin to add support. That view reflects the ratings agency’s assessment that years of power disruptions are easing and that reforms in freight logistics and state-owned enterprises are beginning to show progress.
State firms in both power and freight have been at the center of South Africa’s economic constraints. Eskom’s inability to keep the lights on — a crisis that frequently cuts power to homes, factories, and mines — has repeatedly held back growth. At the same time, bottlenecks at Transnet, the state freight and ports operator, have choked exports in major sectors such as mining. The government has attempted to tackle these issues through structural reforms that allow more private-sector participation and clearer operational targets. S&P said those changes are contributing to the improved outlook.
Fiscal performance is also beginning to align with Treasury’s targets. Revenue collections have exceeded projections early in the 2025 fiscal year, giving the government breathing room as it pursues fiscal consolidation. The ratings agency said it expects successive years of primary surpluses and continued discipline through 2028, underscoring expectations that the consolidation trend will hold.
Even with the upgrade, South Africa remains two notches below investment grade on its foreign-currency rating. The country first fell into junk status in 2017 after the removal of then Finance Minister Pravin Gordhan by President Jacob Zuma triggered political turmoil and policy instability. Successive downgrade cycles from that moment deepened investor concern and drove up borrowing costs.
S&P kept South Africa’s outlook at “positive,” signaling that further improvements could arise if reforms continue to take hold, the fiscal position strengthens further, and growth stabilizes above recent lows.
The upgrade marks a symbolic turning point for Africa’s most industrialized economy, which has spent years struggling to reverse weak growth, unreliable power supply, and widening fiscal strain. But holding the momentum is likely going to depend on the government’s ability to keep reforms on track while navigating slow global demand, stubbornly high domestic unemployment, and pressure to expand social spending.
