S&P Raises South Africa's Outlook to Positive on Political Stability

AFRICAN BUSINESS AND ECONOMYNovember 18, 2024 at 3:04 PM UTC

TLDR

S&P Global Ratings upgrades South Africa's debt outlook to positive, indicating potential credit rating improvement.
Improved political stability and reforms post GNU formation are key factors influencing the rating upgrade.
Treasury foresees a wider budget deficit in 2024/25 BUT expects debt stabilization at 75.5% of GDP by 2025/26.

S&P Global Ratings upgraded South Africa’s debt outlook to positive from stable, signaling improved prospects for a credit rating upgrade.

The agency cited increased political stability and reforms following the formation of a government of national unity (GNU) after May elections as key drivers of its decision. However, the nation’s foreign-currency long-term rating remains at BB-, three notches below investment grade.

The GNU, comprising the African National Congress, the Democratic Alliance, and smaller parties, has prioritized economic growth, job creation, and fiscal sustainability. While the Treasury projects a widened budget deficit of 5% of GDP for 2024/25, it expects debt to stabilize at 75.5% of GDP by 2025/26.

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Key Takeaways

S&P’s improved outlook reflects optimism about South Africa’s reform agenda and easing electricity load-shedding, which is expected to boost GDP growth from 1.0% in 2024 to 1.4% in 2025-2027. The GNU's commitment to fiscal sustainability and infrastructure investment offers hope for economic recovery, but challenges like a rising deficit underscore the need for continued reforms to achieve a credit upgrade.

South Africa

Economy

Finance

Credit Rating

S&P

S&P Global Ratings

African National Congress