South Africa could be upgraded by major global credit rating agencies over the next year, possibly as soon as post the Medium-Term Budget in October and local government elections in November, or following the main budget in February 2027.
That’s the view of some economists following Moody’s Ratings upping its outlook on South Africa’s fiscal position on Friday. However, they warn that much depends on the country’s continued improvement on the fiscal and reforms front.
“A climb out of junk status no longer feels like an impossibility,” Izak Odendaal, investment strategist at Old Mutual Wealth said in a LinkedIn post on the weekend, following Moody’s announcement.
“The positive outlook suggests an upgrade to Baa1 is possible, perhaps after next year’s [main] Budget if fiscal performance continues to improve through sustained primary surpluses and declining debt service costs,” he explained, partly quoting Moody’s regarding the need for sustained improvements in SA’s fiscal position.
“Moody’s lifted the outlook on the South African government’s credit rating to ‘positive’. The improved outlook is based on an ongoing commitment to fiscal consolidation and implementation of structural reforms that will gradually raise the country’s growth rate,” he noted.
Source: Izak Odendaal, via LinkedIn
Gina Schoeman, senior economist at Citi Group South Africa, tells Moneyweb that ratings upgrades are “very possible” – barring political or inflation concerns in the second-half of the year.
SA holds local government elections in November this year, just after the mid-term budget in October.
“What we would look for here is not necessarily a Moody’s Ratings upgrade later this year, but potentially an S&P Global ratings upgrade – the reason being that S&P moved to the positive outlook [on SA] first,” says Schoeman.
“Now, we have to look back at why S&P moved to a positive outlook to see if those reasons have continued, progressed and improved, so we’ve actually got evidence and data of it… Then, we also have to make sure that nothing else is offsetting any of these positive developments.
“Where we stand right now, I would argue that in the light of this Moody’s positive outlook too – despite the Middle East crisis – it is a stamp in favour of South Africa doing the right things under a very difficult condition,” she adds.
Schoeman says a positive is that SA still has “monetary policy discipline” – as the South African Reserve Bank moves towards targeting its lower inflation target.
“It’ll be a good thing for the Sarb to tackle inflation and to adhere to the new inflation target that they set… That’s definitely something that S&P would look at later this year, and something that Moody’s would need to see to retain the positive outlook,” she adds.
“Secondly, it’s the fiscal side. Fiscal and [thirdly] structural reforms have been the two bigger features of, I would say, these two positive outlooks. And that makes sense. We’re looking at the credit quality of a country,” she says.
Stabilising debt
“We need to see a continuation of the fiscal discipline from National Treasury… I’m referring to the goal or the objective to stabilise the debt-to-GDP ratio…
“Even if there’s a bit of fiscal slippage, it wouldn’t be enough that they would have to borrow more and that is what they’re trying to avoid at all costs. If they have to borrow, then unfortunately, you’re not going to see a ratings upgrade and you could lose your positive outlook,” she explained.
So, can SA see a ratings upgrade later this year? “Yes, absolutely,” she says.
“We need fiscal discipline to continue. We need the Sarb to tackle inflation to the point where it is not expected to derail economic growth or social instability. And thirdly, we need to continue to see progress on structural reform,” says Schoeman.
“That’s your three-phase trifecta in order to get a ratings upgrade or retain a positive outlook in the future,” she adds.
Moody’s insights
Meanwhile, in an investment note titled ‘Moody’s signals growing confidence in SA’ published on Monday, Momentum economists Sanisha Packirisamy and Tshiamo Masike, highlighted: “Moody’s indicated that it would upgrade the credit rating if SA’s ‘fiscal performance continues to improve’ as this would signal stronger policy effectiveness and sustained reform implementation.”
They noted that SA’s Government of National Unity is expected to see through its term in Moody’s baseline assumptions.
They said Moody’s acknowledges that the upcoming electoral cycle, including the local government elections, presents political and policy risks. But, “While Moody’s notes that reform momentum might slow down during the election period, a complete rollback of these structural changes is seen as highly unlikely.”
“Fitch increasingly looks like the cautious outlier among the major rating agencies on SA,” Packirisamy and Masike said.
“While Moody’s has now shifted its outlook to positive and S&P Global Ratings already upgraded SA in late 2025 to BB [two notches below investment grade], Fitch has maintained a more conservative stance at BB- [three notches below investment grade] with a stable outlook, in its last major sovereign review released in September 2025.
“The divergence largely comes down to Fitch’s greater scepticism around SA’s debt trajectory and medium-term growth potential. Fitch has repeatedly warned that debt stabilisation assumptions may be too optimistic and that structural constraints, such as weak logistics, low investment and subdued growth, continue to weigh heavily on the sovereign’s profile,” they add.
“By contrast, Moody’s and S&P appear increasingly willing to give policymakers credit for incremental reform delivery, stronger primary surpluses and reduced contingent liability risks linked to Eskom and other state entities,” said the Momentum duo.
