CHAMWE KAIRA
The South African government has noted and welcomed S&P’s decision to revise South Africa’s outlook to positive from stable and affirm the sovereign’s long-term foreign and local currency debt ratings at ‘BB-’ and ‘BB,’ respectively, the government said in a statement on the Johannesburg Stock Exchange.
According to S&P, the positive outlook reflects the agency’s view that increased political stability following the May 2024 general elections and impetus for reform could boost private investment and GDP growth.
S&P expects that South African GDP growth will increase to 1.4% over 2025–2027 from 1% in 2024 as electricity load-shedding has eased, but ongoing logistics bottlenecks will continue constraining economic activity.
Despite high gross government debt of about 76% of GDP, fiscal consolidation is ongoing and South Africa benefits from access to deep domestic markets and an actively traded currency.
“We therefore revised our outlook on South Africa to positive from stable and affirmed our ‘BB-/B’ foreign currency and ‘BB/B’ local currency long- and short-term ratings on the sovereign,” said S&P.
“The positive outlook reflects the potential for stronger growth than we expect, alongside government debt stabilization, if the new coalition government can accelerate economic reforms while addressing infrastructure- and fiscal-related pressures,” the agency said.
S&P said it expects real GDP growth to pick up slightly to 1% this year from 0.7% in 2023, as more private sector-driven electricity supply comes on stream.
“Load shedding peaked in 2023, and we expect electricity shortages to be less acute. There have been more than 200 days without large-scale power cuts since March 2024. Nevertheless, still-subdued consumption and logistics bottlenecks around railway capacity and port operations continue to affect activity across several sectors, including export-oriented ones. In addition, agriculture contracted 10% in the first half of the year due to drought and animal disease,” the agency said.
S&P said the energy sector is seeing some success in improving generation—a private sector pipeline of 22 500 MW of energy generation projects totals almost 400 billion rand over the medium term.
The agency said it forecasts that South Africa’s current account deficit will average 1.7% of GDP over 2024-2027, compared with 1.6% in 2023.
“While imports of energy equipment sharply declined in 2024, we expect some pick-up in imports as consumption and investment increase, while commodity exports will remain constrained due to broadly weak prices and Chinese demand, along with insufficient rail capacity and bottlenecks at ports.”
The agency said improving business confidence could spur growth in private-sector credit. The agency forecast lending growth in 2025 to exceed nominal GDP growth at 8%-9%.
“Credit conditions are set to ease gradually through 2025 amid moderating inflation, which will support household consumption and the mortgage market. We expect credit losses to normalize below 1%, near historical trends, in 2025. Similarly, we expect nonperforming assets to improve toward 4.4% of total loans in 2025 after reaching 4.9% in 2023.”
