Bank of America has noted that if South Africa shows higher GDP growth in 2025 and makes strides in lowering the debt burden, the country could move up two notches in its credit rating, placing it on the cusp of getting out of junk status.
This prediction comes from Tatonga Rusike, the Sub-Saharan Africa economist at the Bank of America.
Rusike made this assertion at a media round-table on Thursday and noted that if South Africa provides “stronger GDP prints, then S&P (Standard & Poor) can review again in November 2025 and into 2026 to get rating upgrades”.
“So we do see that the next three years if we do deliver on GDP growth and debt declining, it is possible to get up two notches in three years,” he explained.
“Growth of at least 1.5% of GDP on an annual basis over the medium term is good enough.”
Bank of America believes that S&P will elevate South Africa's credit rating to BB by November 2025, representing a one-notch upgrade from its current BB- rating with a positive outlook.
The bank said that if SA continued to show good GDP growth and investor sentiment rises then this could prompt Fitch to raise the outlook on its credit rating from stable to positive during the course of 2025.
Rusike’s prediction seems to follow a statement made by Finance Minister Enoch Godongwana.
Earlier in the week, the minister said that South Africa should regain its investment-grade credit rating by 2027 and could exit junk status.
Where do we stand now?
SA is currently rated below the investment grade with a stable outlook by all three major rating agencies.
S&P’s credit rating for South Africa stands at BB- with a positive outlook, and Fitch also rated the country at the same level or denomination, in September 2024.
Moody's credit rating for SA was last set at Ba2 with a stable outlook in April 2022.
South Africa is three notches below investment grade and in junk status. Essentially if Rusike is correct and we move up two notches we would just be on the verge of being out of junk status.
Minister Godongwana said that government is placing structural reforms at the top of its agenda to push economic growth.
He acknowledged that the three ratings agencies still have major reservations about SA’s growth and economy.
"As long as we have not turned around the growth outlook, the rating agencies will still be sceptical about us," the minister said.
"That is why we are working hard on structural reforms, such as in the logistics and telecommunications sector, to transform growth. Once we see that growth in numbers, you will see the rating agencies change," Godongwana concluded.
Higher growth
Rusike said that Bank of America forecasts GDP growth improving to 1.6% in 2025 and this showed resilient growth when compared with less than 1% growth in the last two years.
The economist also praised the improvements that have been made thanks to the formation of the Government of National Unity (GNU) and the lack of load shedding.
“We do see improvements coming from reduced power cuts or no load shedding, and then also the GNU confidence turning into domestic investment, with improving consumption, helping to place growth on a higher path,” Rusike explained.
“Continued reforms will also help with stimulating domestic investment, particularly in the logistics sector,” he added.
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