Government debt, after stabilising at 78.4% of the economy in 2025/26, is finally beginning to decline, according to figures announced by Finance Minister Enoch Godongwana in his medium-term budget on Wednesday. Tax revenue has exceeded expectations, the deficit is narrowing, and Treasury is proposing stricter rules to stop debt spiralling again. For investors and lenders who price South African risk daily, those are meaningful signals.
The country’s borrowing costs have been shaped for years by its credit ratings. Agencies such as Moody’s, Fitch and S&P assess how likely a country is to repay its debts, effectively a credit score for an entire nation. A strong rating attracts investors and makes borrowing cheaper. A weak one, unflatteringly known as junk status, signals greater risk and raises the price of debt.
Additional reference context is available at https://explain.co.za/2026/10/22/south-africa-is-eyeing-a-credit-upgrade-after-years-in-the-junkyard/.
South Africa learned that lesson the hard way. Under former president Jacob Zuma, weak growth, rising debt, corruption and state capture steadily eroded investor confidence. The breaking point arrived in April 2017, when Zuma fired the respected finance minister Pravin Gordhan in a controversial Cabinet reshuffle. S&P and Fitch promptly downgraded the country to junk status. Moody’s held out until March 2020, when it too withdrew its investment-grade rating, leaving South Africa below the threshold with all three major agencies.
The market consequences were immediate and costly. Some international funds were compelled to sell South African government bonds because their mandates prohibited holding junk-rated assets. That shrank the pool of potential lenders and put greater pressure on borrowing costs.
The recovery, however, has already begun. S&P upgraded South Africa in November 2025, its first such upgrade in roughly 20 years. Goldman Sachs economists believe further upgrades could follow, potentially from both S&P and Moody’s.
The stakes are considerable. A better rating would mean cheaper borrowing for the government, freeing up money for roads, schools and hospitals instead of debt repayments. Every notch recovered lowers the risk premium investors demand, and with it the interest bill on the national debt.
Caution is still warranted. South Africa remains two notches below investment-grade status, and the economy itself remains sluggish, which limits how quickly fiscal metrics can improve. Rating agencies will want to see sustained discipline before rewarding the country further, and Treasury’s proposed debt rules will need to hold.
Even so, the direction of travel is clearer than it has been in years. Godongwana’s budget gave economists more reason to hope that the country could soon earn another upgrade, and with it a lower cost of capital. For a government that has spent nearly a decade paying a penalty for past mismanagement, that would be a financial turning point worth noting.