Moody's upgrade hopes lift stakes for SA households

For ordinary South Africans, a credit rating upgrade is anything but abstract. Borrowing costs, the space government has to fund services and infrastructure, and the pace of job creation all hinge on how international agencies judge the management of public finances. That judgment moved closer in the country’s favour this week, after Moody’s described the medium-term budget policy statement (MTBPS) tabled by finance minister Enoch Godongwana last week as credit positive, confirming progress in fiscal consolidation.

The agency’s assessment matters because it signals that the fiscal discipline outlined to Parliament could translate into a rating upgrade within a year or so. Moody’s, which revised its outlook on South Africa to positive from stable in May, is scheduled to give its next review on November 27, as is S&P Global. Fitch will publish its own on December 11.

In its statement on Monday, Moody’s applauded South Africa’s progress in fiscal consolidation despite higher oil prices, tighter monetary policy and weaker nominal GDP growth than assumed in the February budget. The agency said this would “help to anchor fiscal improvements through the electoral cycle, even as a track record of compliance still needs to be established”.

For citizens, the substance behind those words lies in what the Treasury has committed to. Godongwana last week reiterated the National Treasury’s commitment to reining in debt, which he said had stabilised at 78.4% of GDP in 2025/26 and would be reduced over the rest of the decade as the country continued to grow the primary surplus and narrow the budget deficit. He told MPs that efforts to limit bailouts of state-owned entities, to fund new commitments responsibly and prioritise investment over unsustainable consumption were beginning to pay off, creating a stronger foundation for investment, growth and job creation.

Moody’s noted that broad-based revenue outperformance had allowed the government to lower its consolidated deficit target for the 2026/27 financial year to 3.9% of GDP from the 4% forecast in the February main budget. This was achieved even while absorbing a temporary extension to fuel price relief and funding additional infrastructure investment. “This is the second consecutive MTBPS without upward deficit revisions, adding to a track record of fiscal delivery that, if sustained, would support debt reduction and upward rating pressure,” the ratings agency said.

The introduction of draft fiscal anchor legislation alongside the MTBPS was also credit positive, Moody’s said, because it would help maintain prudent fiscal policy through the 2027-29 electoral cycle and preserve the strong fiscal gains beyond the administration of President Cyril Ramaphosa. “Importantly, the updated institutional arrangements will provide greater independent oversight to fiscal policymaking even as the authorities have opted against a binding numerical target.”

Whether an upgrade comes next month is a closer question. Although some economists see a ratings upgrade in November as unlikely, Bank of America said in a recent viewpoint: “We view Moody’s as the most likely agency to act, with a potential upgrade to Ba1, while an S&P upgrade to BB+ remains a closer call.” On Monday an analyst at the bank said the view still holds after the MTBPS.

Meanwhile, Investec economist Annabel Bishop said on Monday that last week’s MTBPS projections show a rising consolidated primary surplus even with increased infrastructure spending planned, which Moody’s evidenced as a particularly notable commitment to fiscal consolidation. “Moody’s has previously indicated South Africa is in line for a credit rating upgrade, having revised the outlook to positive in May this year, which means an upgrade is likely in around 18 months,” Bishop added.

The broader picture shows steady movement across all three major agencies. Prior to its improved outlook for South Africa in the May review, Moody’s in December 2025 left its credit rating unchanged at Ba2, nearly three weeks after S&P raised the foreign-currency rating for the first time in two decades from BB minus to BB and the local-currency rating to BB+ from BB, while lifting the outlook to positive. In late May, S&P affirmed both the rating and outlook. Fitch, for its part, upgraded the country’s long-term sovereign rating by one notch to BB from BB- in June, citing prudent fiscal management despite weak growth and economic shocks. It said it saw South Africa’s debt-to-GDP levels well below those expected when it downgraded the country to BB- in 2020.

The Treasury said at the time that Fitch’s move meant all three major rating agencies now rated the country at BB or Ba2, two levels below investment grade, “with Moody’s and S&P having the sovereign on a positive outlook, indicating they could look to upgrade their ratings within 12 to 18 months”. For the public, the coming reviews will show whether that promise of a stronger fiscal foundation is being converted into a lower cost of borrowing and, ultimately, more room for the services and investment on which citizens depend.