Credit ratings agency S&P Global has maintained South Africa’s sovereign credit rating with a positive outlook, citing potential for stronger-than-expected economic growth.
This decision comes despite ongoing trade and tariff challenges, fiscal consolidation pressures, and infrastructure strains. S&P believes the outlook could improve if the Government of National Unity (GNU) successfully accelerates economic and fiscal reforms.
On Friday, the agency said it expects South Africa’s GDP growth to average 1.5% between 2025 and 2028, following sluggish growth of just 0.6% in 2024. However, it warned that persistent logistical bottlenecks and global tariff-related pressures will continue to limit economic performance.
Despite tensions within the ruling coalition—particularly regarding a proposed VAT hike—S&P noted that the GNU has remained stable, which it sees as a positive sign for policy continuity and reform momentum.
“Despite the re-tabling of the budget and the likely removal of the VAT increase, the government plans to continue with fiscal consolidation and fiscal financing benefits from access to deep domestic markets and an actively traded currency.
“We have, therefore, affirmed our ‘BB-/B’ foreign currency and ‘BB/B’ local currency long and short-term ratings for South Africa. The outlook remains positive,” S&P said in a statement.
The agency indicated that it may upgrade South Africa’s credit rating if effective reforms lead to sustained growth and lower public debt. However, the outlook could revert to stable if reform progress stalls, leading to slower growth or higher-than-expected fiscal burdens—especially if infrastructure constraints worsen.
“The ratings on South Africa benefit from the country’s sizable and sophisticated financial system that provides a deep funding base for the government.
“The country also has relatively strong institutions, with good checks and balances, particularly its central bank, the South African Reserve Bank [SARB].
It noted that the ratings are constrained by relatively low GDP per capita and low GDP growth rates, and sizable fiscal deficits and high government debt.
S&P forecasts GDP to edge up to 1.3% in 2025 as additional private electricity generation capacity comes online and last year’s drought does not recur.
“We forecast a slight rebound in growth from 2024 levels, but lower than our November forecast of 1.5% on average over 2026-2028, partly supported by likely lower interest rates, as well as the recent establishment of a two-pot retirement system that allows people to partially withdraw funds from their retirement accounts, which could boost consumption.
It said that given population growth, it still forecast per capita GDP growth to be less than 0.5% and insufficient to materially raise living standards or reduce unemployment.
S&P’s GDP growth projections over 2025-2027, averaging 1.4%, are slightly lower than the government’s of an average of 1.7%, largely due to our less-supportive view on investment, it said.
Beyond economic challenges, S&P also cited diplomatic tensions with the US, which has suspended aid and bilateral support to South Africa. The US has also signalled support for Afrikaners who allege discrimination and has declared former South African ambassador Ebrahim Rasool persona non grata.
The agency projects South Africa’s general government debt will remain elevated, averaging around 80% of GDP between 2025 and 2028.
“We consider South Africa’s monetary flexibility, the freely floating exchange rate and the country’s deep financial markets significant credit strengths.”
