Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations that may act as a lender of last resort.

Scope performs monitoring reviews to determine whether material changes and/or changes in macro-economic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit rating’s performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope announces the result of each monitoring review on its website and/or on its subscription platform ScopeOne.

Scope completed the monitoring review for the Republic of South Africa (long-term local- and foreign-currency issuer and senior unsecured debt ratings of BB and Stable Outlook; short-term local- and foreign-currency issuer ratings of S-3 and Stable Outlook) on 27 January 2026.

This monitoring note does not constitute a credit-rating action, nor does it indicate the likelihood that Scope will conduct a credit-rating action in the short term. Information about the latest credit-rating action connected with this monitoring note along with the associated ratings history can be found on scoperatings.com.

Key rating factors

For the updated rating report accompanying this review, please see here.

The Republic of South Africa (South Africa)’s BB rating is underpinned by: i) the size and diversification of the domestic economy – the largest of the African continent – underpinning its robust external position; ii) a favourable structure of the government debt, strong capital market access, and budgetary efforts to stabilise the government debt; iii) a robust monetary-policy framework and flexible exchange rate regime; and iv) the resilience of the domestic banking system alongside deep financial markets.

Conversely, South Africa’s BB rating is challenged by: i) rising government debt driven by elevated headline deficits, low debt affordability, and a crystallisation of contingent liabilities; ii) modest economic-growth potential curbed by under-investment in public infrastructures alongside associated pressure on economic competitiveness; iii) governance challenges; and iv) socio-economic vulnerabilities such as high unemployment, poverty and income inequality.

Economic growth has been resilient to global trade uncertainty, and it is set to moderately improve thanks to ongoing reforms to strengthen the business environment and bolster investor sentiment. The government of national unity formed after the 2024 elections introduced reforms to tackle supply side bottlenecks, mainly in the energy and transport sectors, and to improve the efficiency of public spending and tax collection. Real GDP growth is projected at 1.4% in 2026, up from 1.3% in 2025, and 1.5% on average by 2030, which is in line with South Africa’s moderate growth potential. Growth outlook and external competitiveness could further benefit from the new inflation target of 3%, with a 1 percentage point tolerance band that will be implemented over the next two years, the appreciation of the rand relative to the US dollar, and higher commodity prices. Domestic bottlenecks and global tensions with the United States (AA-/Stable), South Africa’s second-biggest trading partner after China (A/Stable), are the main downside risks.

The general government’s primary balance is projected to increase from a deficit of 0.5% of GDP in 2025 to a surplus of 0.4% in 2026, and around 1% on average over 2027-30. However, the ability of the government to increase that surplus to a level enabling to stabilise government debt-to-GDP will be hindered by high pressures on current spending (among which social transfers, public sector wages), a relatively narrow tax base, and meaningful public investment needs to address infrastructure deficits. Stable, albeit elevated, net interest payments, set to average 19% of government revenue between 2026 and 2030, will further limit the decline of the headline deficit, from 5.8% of GDP in 2025 to about 4% in 2030.

Although the 2025 Medium Term Budget Policy Statement (October) outlined the government’s strong commitment to fiscal consolidation and debt stabilisation, Scope considers that sustained and rising primary surpluses to stabilise government debt-to-GDP are uncertain due to high implementation risks. The general government debt is projected to rise from 77% of GDP in 2026 to 84% by 2030, or an increase of 27 percentage points relative to its pre-Covid level. South Africa’s public debt trajectory is also exposed to tighter funding conditions and to the materialisation of contingent liabilities stemming from state-owned enterprises.

On that basis, South Africa’s rating trajectory will primarily depend on the government’s ability to deepen growth enhancing reforms and advance fiscal consolidation, increasing the likelihood that public debt will stabilise over the forecast horizon. The government is expected to further clarify its fiscal consolidation strategy in the 2026 Budget (February), for instances around a binding fiscal anchor, improved revenue collection, and enhanced public spending efficiency.

The Stable Outlook represents the opinion that risks for the ratings are balanced over the next 12 to 18 months.

Upside scenarios for the long-term ratings and Outlooks are (individually or collectively):

1. Sustained budgetary consolidation stabilises public debt-to-GDP and the interest payment burden;
    
2. Reforms addressing long-standing fundamental challenges enable a material rise in economic growth potential and the countering of socio-economic risks;
    
3. External-sector risks decrease, such as a significant bolstering of foreign-currency reserves.

Downside scenarios for the ratings and Outlooks are (individually or collectively):

1. The public-debt burden continues to rise, for example, due to delays in budgetary consolidation, further rises in the interest burden and/or additional support being demanded by state-owned enterprises;
    
2. The economic-growth outlook stays impaired, exacerbating outstanding socio-developmental challenges;
    
3. The external-sector risk profile weakens, such as a material decline in foreign-currency reserves and/or a significant depreciation in rand;
    
4. Governance challenges escalate.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 January 2025) is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Thomas Gillet, Director

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