South Africa has achieved a rare financial milestone: S&P Global Ratings has officially upgraded the country’s credit rating, marking the first positive adjustment in nearly two decades. The move signals growing confidence in South Africa’s fiscal recovery, improved economic direction, and the slow but steady success of long-term structural reforms.
The announcement delivered an immediate boost to market sentiment. The rand strengthened to R17.08 shortly after the news—an improvement from R17.15 earlier in the afternoon—building on the positive momentum created by Wednesday’s mini-budget.
Why S&P Upgraded South Africa
S&P’s decision is grounded in several improving indicators:
The agency highlighted stronger-than-expected fiscal performance, improved revenue collection, moderated expenditure, and a noticeable decline in pressures from state-owned enterprises.
S&P noted that tax revenue had significantly outperformed projections, helping stabilize the fiscal trajectory. “Given improving tax collections and expenditure constraints, we expect fiscal consolidation to continue through fiscal 2028,” the agency said.
The South African Revenue Service (SARS) has played a major role. Commissioner Edward Kieswetter said the agency supports the mini-budget’s direction, highlighting year-on-year revenue growth of R78.6 billion by September 2025 and a surplus of R18 billion against estimates. Nearly half of this performance came from strengthened compliance efforts. SARS has also paid R232.9 billion in refunds this year.
Economic Growth Outlook Rises
S&P forecasts real GDP growth to increase to 1.1% in 2025, following a slower 0.5% in 2024.
Growth is expected to average 1.5% between 2026 and 2028, supported by ongoing progress in electricity, logistics, and structural reforms.
These projections align with local economists’ views after Finance Minister Enoch Godongwana’s mini-budget, which was notably more optimistic than the National Budget earlier this year. Analysts pointed to rising revenue, a narrowing debt-to-GDP ratio, and stabilising government expenditure as encouraging signs.
Anchor Capital’s Nolan Wapenaar described the budget as “a good news story,” noting that debt issuance volumes were decreasing. Economist Casey Sprake added that the speech was delivered in a “more constructive environment,” helping create a stronger market response. The result was immediate—stronger rand, lower bond yields, and renewed confidence in South African companies.
Operation Vulindlela Phase II Gains Momentum
A key element behind the upgrade is the progress under Operation Vulindlela, the government-business partnership aimed at fast-tracking structural reforms.
Phase I saw nearly half of its targeted reforms completed or on track. Phase II introduces new priorities, including local government reform and a Digital Transformation Roadmap.
Notable achievements to date include:
• A competitive electricity market framework
• A new model enabling independent transmission projects
• Progress in logistics reforms, including opening parts of the rail network to private operators
These structural improvements are steadily reducing risks that previously held the economy back.
A Step Closer to Escaping Junk Status
The upgrade moves South Africa one notch closer to exiting the so-called “junk status” category, signalling to global investors that the country is regaining fiscal credibility.
S&P also noted that state-owned enterprises are expected to require less government support going forward—a key long-term concern for ratings agencies. The outlook for South Africa remains positive.
The financial landscape, once dominated by uncertainty, now shows early signs of resilience and reform-driven recovery. The next chapter depends on sustained political will, economic discipline, and consistent delivery of long-promised reforms.
