Moody’s says South Africa could earn a credit rating upgrade if its public finances keep improving, adding detail to a positive outlook it first set in May. Vice president Evan Wohlmann told a virtual media briefing that an upgrade is possible “if fiscal performance continues to improve”, according to a Bloomberg report published by Moneyweb on 14 October 2026.
A sovereign credit rating is an agency’s grade of how likely a government is to repay its debt. Moody’s rates South Africa Ba2, two notches below investment grade.
What Moody’s decided in May
The outlook change itself is not new. Moody’s dated its rating action 22 May 2026, revising the outlook to positive from stable and affirming the Ba2 ratings on both domestic and foreign-currency debt, as SAnews, the government news agency, reported. An outlook is the agency’s signal of which direction a rating is likely to move over the medium term. It is not a rating change.
Moody’s cited gradually strengthening fiscal performance and a sustained commitment to structural reforms. It said it expects “a rising primary surplus and gradually improving debt-service costs” to stabilise the government debt burden in the near term. The primary surplus is the amount by which revenue exceeds spending before interest payments.
Its projections, per SAnews, are for stronger investment, supported by reforms, to lift real GDP growth to about 2% by 2028, and for the primary surplus to rise to about 2% of GDP in that year, supporting a gradual fall in the debt-to-GDP ratio. Business Day, carrying a Reuters report, noted that public debt had risen steadily for more than a decade, driven by weak growth, repeated support for state-owned companies and the Covid-19 pandemic, with interest payments taking a large share of revenue.
What it still depends on
At the October briefing Moody’s said the baseline forecast has debt peaking at 87% of GDP in the last fiscal year and falling gradually to 84% by the end of the decade. Moneyweb’s report says Moody’s regards the country as having reached an inflection point after stabilising its debt and introducing pro-growth reforms.
The ratings agency is still cautious about the economy. The Moneyweb report notes that growth has averaged less than 1% over the past decade, and that Nedbank expects it to edge up to 1.9% over the next two years, with 2.5% possible by 2030. In May, Moody’s said the rating remained constrained by weak fiscal and economic fundamentals, low growth potential and high inequality, according to Reuters.
Two dates fall within the next three weeks. Finance Minister Enoch Godongwana presents the mid-term budget review on 21 October, which is expected to show a continued rise in the primary surplus, supported by higher income. Municipal elections follow on 4 November, and the report says they may cost the ANC further support. Moody’s sees a low risk that the electoral cycle reverses reforms, pointing to the shift to coalition government in 2024.
How long an upgrade could take
A positive outlook is a good sign, not a promise. Moody’s upgrades about 60% of the sovereign credits it assigns a positive outlook. Lucia Villa of Moody’s cautioned that restoring investment grade could still take time, saying downgrade cycles have historically involved about twice as many annual notches as upgrade cycles.
The National Treasury has said South Africa is the only Group of Twenty country currently on a positive Moody’s outlook, and SAnews reports this is Moody’s first positive outlook for the country since 2007. The 2007 outlook was followed by an upgrade in 2009. Treasury Director-General Duncan Pieterse said the decision confirms improving fiscal credibility and that Treasury plans to “embed the fiscal turnaround through the introduction of a fiscal anchor for South Africa”, a rule meant to hold government finances to a set course.
Moody’s is not the only agency to move. S&P Global Ratings upgraded South Africa to BB from BB- in November 2025, the country’s first credit rating upgrade in nearly 20 years, and kept a positive outlook, according to SAnews and Reuters.
Moody’s also flagged risks outside the government’s control. In May it said the conflict in the Middle East could weigh on short-term growth, and Reuters reported that the Iran war has clouded the outlook for net energy importers such as South Africa, which are highly exposed to rising fuel prices.
Source: Moneyweb.
