Goldman Sachs Inc. — one of the world’s leading investment banking and securities management firms — predicts that the improvement in South Africa’s public finances will pave the way for a sovereign credit rating upgrade, just days after Finance Minister Enoch Godongwana presents the government’s budget update.
S&P Global Ratings, which currently rates South Africa’s long-term foreign debt at BB-, three notches below investment grade with a positive outlook, is expected to review the country’s credit rating at the end of the week.
“We think it’s quite likely that they’ll proceed with an upgrade,” said Andrew Matheny, economist at Goldman Sachs, in an interview.
A credit rating increase would mark a significant milestone for South Africa, boosting confidence in the country and its assets. It would also signal growing trust in the government’s fiscal consolidation efforts, which have so far been challenged by large deficits and repeated bailouts of struggling state-owned enterprises.
When Godongwana delivers the Medium-Term Budget Policy Statement this Wednesday (12) in Cape Town, it is expected that the National Treasury will meet or exceed its main fiscal deficit target. In May, the Treasury projected a budget gap of 4.6% for 2025–26.
“They’re overperforming by a wide margin and will probably present a fairly constructive narrative on the fiscal position,” Matheny said.
His views align with those of four out of nine economists surveyed by Bloomberg, including analysts from Bank of America Corp. and RMB Morgan Stanley, who also expect an upgrade this year.
According to Matheny, rating agencies have outlined three conditions to watch: slightly stronger economic growth, continued fiscal consolidation, and no new bailouts for state-owned companies. “If our expectations for the Medium-Term Statement are confirmed, we believe these factors could trigger an upgrade,” he added.
Even so, others — such as Gina Schoeman, Citigroup Inc.’s economist for South Africa — expect an upgrade only next year.
“We think the S&P credit review on November 14 is still too early for an upgrade,” she said. However, she noted that an improvement could come in 2026, provided that GDP growth strengthens, supported by higher fixed investment, a stabilized debt-to-GDP ratio, and a more stable government of national unity, formed after the African National Congress (ANC) failed to win an outright majority in the 2024 elections. A dispute over the national budget earlier this year even threatened the survival of that coalition.
Source: Bloomberg
