Ratings upgrades a vote of confidence in SA’s direction of travel

The recent improvements in SA’s sovereign credit rating have been greeted with understandable enthusiasm.

In November 2025, S&P Global Ratings upgraded the country’s foreign currency rating from BB- to BB, the first such upgrade in nearly two decades.

More recently, in May, Moody’s revised SA’s outlook from stable to positive while affirming its Ba2 rating.

Together, these developments represent the most significant endorsement of the country’s economic trajectory since the years before the global financial crisis.

Yet the real significance of these ratings actions lies not in the headlines, but in what they reveal about SA’s progress, challenges and future prospects.

For years, SA has carried the burden of “junk status”, a label that reflected weak growth, rising debt, governance failures and struggling state-owned enterprises.

The downgrade cycle that began nearly a decade ago became symbolic of a country that seemed trapped in economic stagnation.

The recent upgrades suggest that international investors and ratings agencies are beginning to see a different story.

According to S&P, the upgrade was driven by improving growth prospects, stronger public finances and reduced risks associated with Eskom’s liabilities.

The agency also pointed to consecutive primary budget surpluses and signs that debt levels were beginning to stabilise.

Reuters reported that S&P expects continued fiscal consolidation and gradual improvements in economic performance as energy and logistics reforms gain traction.

But before South Africans celebrate too loudly, economists are urging caution.

The first and perhaps most important point is that a ratings upgrade is not an economic miracle.

It does not immediately create jobs, reduce poverty or put more money into people’s pockets. Rather, it is an assessment of risk.

When ratings agencies upgrade a country, they are effectively saying there is a lower risk that the government will struggle to repay its debt.

This makes the country more attractive to investors and can lower borrowing costs over time.

Economists frequently describe sovereign ratings as a report card on economic management rather than a report card on economic wellbeing.

A country can receive an improved rating while millions of its citizens continue to face unemployment and hardship.

This distinction is crucial in SA’s case.

While the country’s fiscal position has improved, growth remains stubbornly weak.

S&P itself recently warned that SA remains an “outlier” among comparable economies because of persistently low growth rates.

The ratings agency highlighted weak economic expansion as one of the biggest threats to future upgrades.

That warning should not be ignored.

The real achievement behind the ratings actions is not rapid growth but fiscal credibility.

The National Treasury has succeeded in convincing investors that the government is becoming more disciplined about managing public finances.

Revenue collection has improved, spending controls have strengthened and the debt trajectory appears more stable than it did a few years ago.

Moody’s specifically cited rising primary surpluses, easing debt pressures and sustained structural reforms as reasons for its positive outlook revision.

Economists generally agree that this matters.

Investor confidence is built on trust and predictability.

For years, concerns about Eskom, Transnet, governance failures and policy uncertainty undermined that confidence.

The ratings improvements indicate that investors are beginning to believe reforms may be producing measurable results.

Andrew Matheny, an economist at Goldman Sachs, argued before the S&P upgrade that ratings agencies were looking for three things: improved growth, continued fiscal consolidation and an end to repeated bailouts of state-owned enterprises.

The latest ratings actions suggest SA has made meaningful progress on those fronts.

The government of national unity has also played an important role.

While politics remains contested and often turbulent, ratings agencies appear to view the GNU as a stabilising factor.

Several economists have noted that the coalition arrangement has strengthened perceptions of policy continuity and accountability.

Political stability is increasingly being viewed as an economic asset rather than merely a political outcome.

Yet the path ahead remains challenging.

SA is still below investment grade.

Moody’s rating remains two notches below that threshold, while S&P’s BB rating remains firmly in speculative territory.

In practical terms, this means the country has not yet fully regained the confidence it lost during the years of state capture, fiscal deterioration and institutional decline.

Moreover, ratings agencies are signalling that future upgrades will depend on execution rather than promises.

The country must demonstrate sustained economic growth. It must continue reducing debt burdens. It must avoid costly bailouts and deepen reforms in electricity, logistics and infrastructure.

Most importantly, it must create conditions for private sector investment and job creation.

Recent economic indicators show why this remains urgent.

SA’s private sector unexpectedly contracted in May, highlighting the fragility of the recovery and the vulnerability of the economy to global shocks such as rising oil prices and geopolitical tensions.

This is where the conversation must shift.

The ratings upgrades should not be viewed as an endpoint.

They are better understood as a signal that SA is moving in the right direction after years of decline.

They reflect confidence in institutions, fiscal management and reform momentum. But they do not guarantee future success.

The real test will be whether these gains translate into stronger growth, greater investment and meaningful improvements in the lives of ordinary South Africans.

Ultimately, the positive ratings actions are neither a reason for triumphalism nor grounds for scepticism.

They are evidence that difficult reforms are beginning to earn international recognition.

They represent a vote of confidence in South Africa’s direction of travel.

The challenge now is ensuring that this confidence is justified.

If government maintains fiscal discipline, accelerates structural reforms and unlocks economic growth, these upgrades may eventually lead the country back to investment grade status.

If momentum stalls, however, the optimism reflected in today’s ratings could prove short-lived.

For now, SA has earned something it has not enjoyed in a long time: the benefit of the doubt.

Andile Nduna works for the department of sport, recreation, arts and culture, and writes in his personal capacity