South Africa’s chances for a credit rating upgrade have improved after S&P Global Ratings changed the nation’s debt outlook from stable to positive.
S&P stated that the positive outlook is due to increased political stability following the May general elections and a push for reforms that could enhance private investment and GDP growth.
The agency maintained South Africa’s foreign-currency long-term rating at BB-, which is three levels below investment grade, Bloomberg reported.
Business confidence has risen since the May 29 elections, which resulted in a new governing coalition prioritising economic growth.
This coalition, known as the government of national unity, includes the African National Congress, the centrist Democratic Alliance, and several smaller parties.
The GNU has pledged to create jobs, control public debt, and invest significantly in infrastructure.
The Department of National Treasury welcomed S&P’s decision, stating that the government’s strategy focuses on fiscal sustainability, economic growth, critical social services, and addressing major fiscal and economic risks.
Although the Treasury projects that South Africa’s consolidated budget deficit will increase to 5% of GDP in 2024/25, up from a previous estimate of a 4.5% gap, it still expects debt to stabilize in 2025/26 at a slightly higher level of 75.5% of GDP.
S&P also anticipates that South African GDP growth will rise to 1.4% over 2025-2027 from 1.0% in 2024, as electricity load-shedding has decreased.