<\/p>\n
South Africa is heading in the right direction for its first credit-rating upgrade by Moody\u2019s Ratings since 2009, provided the country\u2019s fiscal performance continues to improve.<\/p>\n
The agency, which rates South Africa Ba2 \u2014 two notches below investment grade \u2014 revised South Africa\u2019s credit outlook to positive from stable in May. It says the country has reached an inflection point after stabilising its debt and delivering pro-growth economic reforms.<\/p>\n
Read:
AfCRA aims to reshape Africa\u2019s credit story
South Africa\u2019s credit-rating upgrades: What do they mean for investors?<\/p>\n
\u201cWe could upgrade South Africa\u2019s rating if fiscal performance continues to improve,\u201d Evan Wohlmann, a vice president at Moody\u2019s, told a virtual media briefing on Tuesday. The assessment would hinge on confidence in how the credit profile will evolve, he said.<\/p>\n
Finance Minister Enoch Godongwana delivers his mid-term budget review on October 21 and is expected to show continued growth in the country\u2019s primary budget surplus \u2013 a gauge of how much revenue exceeds non-interest expenditure \u2013 amid higher income.<\/p>\n
Read: South Africa\u2019s economy is holding up better than expected<\/p>\n
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Wohlmann said the baseline forecast was for debt that peaked in the last fiscal year at 87% of gross domestic product to gradually decline to 84% of GDP by the end of the decade, supported by an uptick in economic output.<\/p>\n
Africa\u2019s largest economy has expanded by less than 1% on average over the past decade. But structural reforms are beginning to deliver, with Nedbank Group predicting growth will edge up to 1.9% in the next two years with 2.5% possible by 2030.<\/p>\n
The country holds municipal elections on November 4 that may result in a further loss of support for the African National Congress, bringing pressure to bear on President Cyril Ramaphosa who is due to step down as the party\u2019s leader at the end of next year before general elections in 2029.<\/p>\n
Read:
SA\u2019s market outdoes rating agencies\u2019 outlook
SA\u2019s bond market is already pricing in an upgrade<\/p>\n
Still, Moody\u2019s sees a low risk of politics pushing South Africa away from its reform path.<\/p>\n
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\u201cWe see the risk of a reversal in policy from the forthcoming electoral cycle as limited,\u201d Wohlmann said, citing South Africa\u2019s shift to a coalition government in 2024 after the ANC lost its parliamentary majority amid public anger over high unemployment and poor service delivery.<\/p>\n
Moody\u2019s track record shows it upgrades about 60% of the sovereign credits that it assigns with a positive outlook.<\/p>\n
Still, restoring South Africa\u2019s investment-grade rating may take some time. There were eight years between Moody\u2019s initially downgrading South Africa, when it was lowered to Baa2 from Baa1 in 2012, and the cut that took it below investment grade in 2020.<\/p>\n
Lucia Villa, Moody\u2019s senior vice president for ratings, said that based on past experience, there were roughly twice the number of annual notches in a downgrade cycle, or consecutive negative rating actions, versus in an upgrade cycle on average.<\/p>\n
\u00a9 2026 Bloomberg<\/p>\n
#Moodys #South #Africa #track #rating #upgrade<\/p>\n","protected":false},"excerpt":{"rendered":"
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