Africa’s biggest economy gets first Fitch rating upgrade in nearly 21 years

South Africa has secured its first credit rating upgrade from Fitch Ratings in almost 21 years, with the agency on Friday raising the country’s long-term foreign and local currency issuer default ratings by one notch to BB from BB-, while maintaining a stable outlook.

The upgrade marks a significant turnaround for Africa’s biggest economy after years of downgrades by major credit rating agencies and places South Africa among the few G20 nations to receive a ratings upgrade from Fitch this year.

“The upgrade primarily reflects South Africa’s record of prudent fiscal management and progress on fiscal consolidation, despite weak economic growth and domestic and external shocks,” Fitch said in a report.

The ratings agency noted that stronger fiscal performance and revisions to gross domestic product data have left South Africa’s debt-to-GDP ratio well below the levels anticipated when Fitch downgraded the sovereign to BB- in 2020.

However, Fitch said the country’s rating remains constrained by weak economic growth, high levels of poverty and inequality, a relatively elevated debt burden and a high interest-to-revenue ratio.

According to the agency, South Africa’s rating is supported by a favourable government debt structure characterised by long maturities, limited exposure to foreign currency debt, strong institutions and a credible monetary policy framework.

The upgrade comes despite a challenging global backdrop in which five investment-grade sovereigns have received negative rating actions from Fitch since the outbreak of conflict in the Middle East earlier this year.

Fitch highlighted South Africa’s shift from primary fiscal deficits to sustained and widening primary surpluses, alongside signs that government debt is stabilising due to improved revenue collection and expenditure discipline.

The agency also cited ongoing reforms in the energy and logistics sectors, which are expected to support stronger economic growth over the medium term.

The latest action follows S&P Global Ratings’ one-notch upgrade of South Africa in November 2025, while Moody’s Investors Service has maintained a positive outlook on the country.

All three major rating agencies now assess South Africa at BB or Ba2 — two notches below investment grade. Both Moody’s and S&P maintain positive outlooks, signalling the possibility of further upgrades over the next 12 to 18 months.

Responding to the decision, South Africa’s National Treasury said the government remains committed to sound fiscal management and structural reforms aimed at supporting stronger and more inclusive economic growth.

“Improved sovereign credit ratings help to lower borrowing costs for government, businesses and households and have tangible benefits for ordinary people,” said Duncan Pieterse, director-general of the National Treasury.

Pieterse said South Africa still has some distance to cover before regaining investment-grade status but noted that, for the first time in more than a decade, the country is experiencing a clear reversal of its downward ratings trajectory.

“The turnaround is especially notable because it comes at a time when the global sovereign credit trend is overwhelmingly negative,” he said.

Fitch also assessed the impact of the Middle East conflict on South Africa’s economy, noting that while higher oil prices are expected to lift inflation, fiscal risks remain manageable.

The agency pointed to the government’s temporary reduction of fuel levies until the end of June 2026, estimating that the measure will reduce revenue by about 0.2 percent of GDP.

“We believe this will be offset by stronger-than-budgeted corporate income tax collection and mineral royalties due to high commodity prices and strong mining companies’ profitability,” Fitch said.