Bank of America Securities says South Africa’s “turnaround story” is moving faster than consensus, pencilling in rating upgrades by Moody’s and Fitch by the end of the year as sentiment towards Africa’s most industrialised economy shifts gears after years of underperformance and ballooning public debt. Bank of America, in a research report, said the 2026 budget, set to be tabled later this month, will serve as a launchpad in convincing Fitch and Moody’s whether to take positive action. “Ratings have been on an upward trend since 2025, after being flat over 2021-2024 following successive downgrades in 2012-2020.
To sustain this momentum, Budget 2026 on February 25 needs to steer the same course as the 2025 MTBPS, in our view. “This means no new material support for state-owned enterprises [SOEs], a less than 4% of GDP deficit, and close to a 2% primary surplus, ensuring debt starts a downward path. If this is the case, the budget could trigger positive rating actions from Fitch and Moody’s, which have yet to respond since South Africa began its turnaround.
“Our baseline view is that ratings could be upgraded by the end of 2026 to BB+/stable from S&P (local currency back in IG BBB-), BB/stable from Fitch and Ba2/positive from Moody’s.” S&P Global in November delivered South Africa’sfirst credit rating upgradein nearly two decades, raising the country’s foreign-currency long-term sovereign rating to “BB” from “BB-” on stronger growth prospects and an improving fiscal outlook. Bank of America said data suggests that South Africa should be rated higher. “Financial markets have rallied.
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Derived ratings from market-implied credit spreads suggest South Africa is now trading as a BB+, which is higher than all agencies rate it today.” However, Bank of America said it might take a while yet for South Africa to get back to investment grade, saying how the country manages the outcome of the 2029 elections will be key to whether it gets the most sought-after grade back. Derived ratings from market-implied credit spreads suggest South Africa is now trading as a BB+, which is higher than all agencies rate it today. South Africa was last on investment-grade status across all major rating agencies until March 2020.
“In our view, returning to investment grade would be difficult in the short term. However, rating upgrades may start looking feasible next year. Our best-case scenario would be two-notch upgrades at Fitch and S&P and one notch at Moody’s within 3-4 years, taking us to the 2029 election.
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