Sovereign Africa Ratings: Stable outlook for South Africa

Sovereign Africa Ratings has upgraded South Africa's long-term and short-term issuer credit ratings from BBB and B to BBB+ and B+, respectively, on both foreign and local currency. The stable outlook on the long-term ratings reflects positive economic indicators, including an expected growth rate of 1.8 percent from 2025 to 2027. Zwelibanzi Maziya, Chief Operating Officer at Sovereign Africa Ratings, discussed the rationale behind the upgrade in a recent CNBC Africa interview. Maziya highlighted several key factors that contributed to the rating upgrade. One significant aspect was the resolved electricity issue, which had previously been a major bottleneck for the country. The growth in South Africa's debt to GDP ratio has slowed down, and the National Treasury has implemented strategies to stabilize the debt. Additionally, the majority of South Africa's debt is denominated in local currency, reducing external exposure risk. The country's deep capital markets and stable economic policies have also played a role in the rating upgrade. Infrastructure investment has shown positive signs of recovery, with investments returning to pre-COVID levels. Maziya emphasized the importance of stable electricity supply for infrastructure development and economic growth. South Africa's domestic market capitalization of $1.5 trillion USD outshines similar-sized economies like Chile, Nigeria, Algeria, and Ethiopia, providing a strong foundation for economic stability. Looking ahead to the rest of 2025, Maziya expressed confidence in South Africa's economic outlook. Government initiatives, such as the Reserve Bank's monetary policies and ongoing reforms, are expected to support economic recovery and promote stability. The upcoming budget in February will be closely monitored, with a focus on debt repayment ability, SOE rescues, and critical infrastructure investments. Despite past challenges, including power cuts and political uncertainties, the stable outlook for South Africa's credit ratings is underpinned by policy continuity and effective implementation. Sovereign Africa Ratings' decision to upgrade South Africa's credit ratings reflects optimism in the country's economic trajectory and resilience in the face of potential risks.