Standard and Poor’s (S&P) Global has revised the country’s credit outlook from stable to positive, indicating a promising trajectory towards a sovereign credit upgrade. Although the nation’s rating remains at sub-investment grade, often referred to as junk status, this optimistic outlook could signal the potential for improvement in the near to medium term.
The change, announced on Friday night, comes after a period marked by increasing political stability and a concerted push for reforms anticipated following the May 2024 general elections. Analysts believe these factors could stimulate private investment and prop up GDP growth, essential elements for the country’s economic recovery.
South Africa lost its investment-grade status back in 2017, a significant setback that has since hampered access to affordable capital. The latest signals from S&P suggest that this era could soon come to an end, especially as projected economic growth targets are realised. If achieved, these improvements in economic indicators may compel S&P to upgrade South Africa’s credit rating, prompting further interest from institutional investors.
The potential ripple effect of a positive rating revision is substantial. A higher credit rating could lead to increased buying in government bonds, consequently providing much-needed liquidity to the market. Enhanced investor confidence may also lend support to the beleaguered rand, strengthening its position in global markets.