The best news about South Africa in 21 years

Fitch Ratings upgraded South Africa’s sovereign credit rating from BB- to BB on 5 June 2026, marking the first upgrade since 2005.

This followed a similar upgrade by Standard & Poor’s (S&P), which increased South Africa’s long-term sovereign credit rating last year.

Momentum Investments economists, Sanishha Packirisamy and Tshiamo Masike, provided details about this upgrade.

They said the upgrade primarily reflects South Africa’s record of prudent fiscal management and progress in fiscal consolidation.

Fitch noted that stronger fiscal outcomes and revisions to gross domestic product (GDP) data have left the debt-to-GDP ratio materially lower than anticipated.

South Africa has recorded primary budget surpluses, averaging around 1% of GDP, over the past four fiscal years.

This is a notable improvement from the average primary deficit of 0.6% of GDP recorded between fiscal year (FY) 2011/12 and FY2019/20.

The primary surplus is projected to widen to 1.7% of GDP in FY2027/28, supported by expenditure restraint.

Higher commodity prices are also expected to support stronger tax revenue collection, which will help to reduce the consolidated fiscal deficit.

“Government debt is projected to stabilise at around 80% of GDP over the next two fiscal years,” the economists said.

Fitch also highlighted a lower risk of contingent liabilities, reflecting improved financial performance at major state-owned enterprises.

Progress on structural reforms has eased some of the supply-side constraints that have weighed on economic growth, particularly in electricity and logistics.

As a result, Fitch revised its growth forecasts modestly higher, with real GDP growth expected to improve from 1.1% in 2025 to 1.4% in 2027.

However, growth remains a key credit constraint, with the 2027 forecast of 1.4% well below the projected BB median of 4%.  

Political risks were assessed as elevated ahead of the local government elections scheduled for 4 November 2026.

Nevertheless, Fitch’s base case is that the GNU remains intact through its full term until the next national elections in 2029.

The agency also expects President Cyril Ramaphosa to remain in office despite an impeachment committee being set up regarding the Phala Phala matter.

Inflation is expected to remain above the SA Reserve Bank’s (SARB) new 3% target and 2% to 4% tolerance band, reaching 4.5% at the end of 2026.

Due to the higher inflation, Fitch expects one additional 25-basis point interest rate increase later this year.  

Fitch maintained a stable outlook for South Africa, while both Moody’s and S&P have positive outlooks.

“The upgrade was unexpected given Fitch’s previous stable outlook and the heightened uncertainty arising from the Middle East conflict,” Momentum Investments said.

The next reviews by Moody’s and S&P are scheduled for 27 November 2026, just over a month after the Medium-Term Budget Policy Statement on 28 October 2026.

These reviews will also take place shortly after the local government elections, where the ANC is expected to lose significant support.

“If fiscal performance continues to improve and government debt has peaked in FY2025/26, further positive rating actions from Moody’s and S&P remain plausible,” they said.

This is provided that geopolitical developments and a potential El Niño event do not materially weaken the growth outlook or fiscal trajectory.

SA is now rated two notches below investment grade by all three major rating agencies