South Africa’s first sovereign credit-rating upgrade in nearly 21 years is certainly worth celebrating. But beneath the stronger fiscal metrics that earned the country a ratings boost lies a less comfortable reality.
Fitch Ratings upgraded South Africa’s sovereign rating to BB from BB- on 5 June. However, ETM Analytics director and head of research George Glynos said investors should not become complacent. Beyond the healthier public-finance picture lies what he called the “uglies in the sideline” – hidden liabilities, weak investment levels, and structural constraints that continue to weigh on the country’s long-term growth prospects.
His comments come as South Africa enjoys a rare moment of recognition from all three major global ratings agencies.
In November 2025, S&P Global Ratings upgraded South Africa to BB from BB- while maintaining a positive outlook. In May this year, Moody’s affirmed its Ba2 rating but shifted its outlook to positive from stable. Then, last week, Fitch completed the trio, upgrading South Africa to BB with a stable outlook.
All three agencies now assess South Africa at two notches below investment grade – a position that would have seemed unlikely just a few years ago when the country was enduring a prolonged cycle of downgrades.
On 702’s The Money Show, Glynos said the Fitch decision sends a clear message: governments that demonstrate fiscal discipline are rewarded.
He noted that South Africa has recorded primary budget surpluses in recent years and has made progress in stabilising its debt trajectory. Over time, he said, these improvements can translate into lower borrowing costs across the economy.
Read: Is South Africa finally turning the corner on debt?
But Glynos cautioned against viewing the upgrade as proof that South Africa’s fiscal challenges have been solved.
“I don’t necessarily want to turn this all negative, but there is an elephant in the room with regards to South Africa’s fiscal position,” he said.
According to Glynos, the concern lies in liabilities that sit outside the government’s main balance sheet. He pointed to risks associated with state-owned enterprises, municipalities, the Road Accident Fund, and even medical malpractice claims. These obligations may not be reflected in the official fiscal statistics, he said, but that does not mean they disappear.
“They don’t get reflected in the official numbers, yet you know full well that at some point in time those debts are going to need to be repaid,” he said.
The result, according to Glynos, is that South Africa’s fiscal position looks less favourable when these risks are taken into account.
He argued that years of maladministration and poor management across some public institutions have created liabilities that remain outside the headline debt numbers but could ultimately place pressure on public finances.
“There’s a lot of work to do off balance sheet that I think South Africa still needs to focus on, and that I think is South Africa’s Achilles heel at the moment,” he said.
Ratings up, growth still missing
Economic growth remains another concern.
Glynos argued that growth is not something governments can simply decree into existence. Rather, it is the outcome of consistent, credible policymaking that attracts investment and lowers perceptions of risk.
He was also sceptical about the gap between announced investment commitments and actual investment activity. Referring to the trillion-rand-plus investment pipeline that the government frequently cites, he said he would prefer to see projects materialise before becoming enthusiastic.
Recent data suggest that concern is not unfounded.
A Reuters analysis published in April found that of the roughly R1.5 trillion pledged through South Africa’s investment conferences since 2018, only R634 billion had flowed into the economy by March 2026 – a conversion rate of just under 42%.
Reuters also reported that gross fixed capital formation – a key measure of spending on machinery, buildings, and infrastructure – has remained stuck at around 15% of GDP, well below the 20% to 25% generally associated with sustained growth in emerging markets.
For Glynos, that is the real challenge. South Africa’s growth prospects will improve only if investment commitments translate into actual spending and find their way into roads, rail, ports, energy, and other productive assets.
Years of underinvestment, he argued, have contributed to subdued growth, and meaningful capital deployment will be needed before the country can expect a stronger growth trajectory.
Those concerns are shared by Bureau for Economic Research chief economist Lisette IJssel de Schepper.
Speaking to CapeTalk’s Early Breakfast with Africa Melane, IJssel de Schepper described the Fitch decision as an important milestone but emphasised that South Africa remains some distance from regaining investment-grade status.
She noted that the downgrade cycle itself unfolded over several years, and the recovery process is unlikely to happen overnight.
According to IJssel de Schepper, the turnaround story has so far been driven largely by fiscal improvements. The next phase will require stronger economic growth.
She said South Africa needs to continue advancing structural reforms, particularly those aimed at removing constraints to economic activity. Although progress has been made in addressing electricity shortages, much more work remains.
IJssel de Schepper also observed that Fitch had been slower than other agencies to shift its view on South Africa. In her assessment, the agency wanted additional evidence that the government could maintain fiscal discipline and continue generating primary surpluses despite various economic shocks.
The upgrade suggests Fitch is now more confident in that trajectory, although the agency remains cautious, retaining a stable rather than positive outlook.
Why Fitch upgraded South Africa
In its rating action commentary, Fitch said the upgrade was primarily driven by South Africa’s record of prudent fiscal management and ongoing fiscal consolidation efforts.
The agency highlighted that South Africa has recorded average primary fiscal surpluses of about 1% of GDP over the past four years, marking a significant improvement from the deficits that characterised much of the previous decade.
Fitch also pointed to progress in structural reforms, particularly in the energy and logistics sectors, which have begun easing some of the supply-side constraints that weighed heavily on growth.
The agency expects debt-to-GDP to stabilise at about 80% over the next two years – still high by international standards, but significantly lower than it anticipated when South Africa was downgraded in 2020.
Revenue collection has remained robust, while spending controls, restrained wage growth, and measures to contain transfer payments have supported fiscal consolidation.
Fitch expects these trends to continue, forecasting that the primary fiscal surplus will widen further and help to narrow the overall budget deficit over the next two years.
The agency also cited several longstanding strengths in South Africa’s credit profile, including a debt portfolio largely denominated in local currency, long debt maturities, strong institutions, and a credible monetary policy framework.
However, Fitch was careful to note that significant challenges remain.
South Africa’s rating continues to be constrained by weak economic growth, high levels of poverty and inequality, elevated debt levels, and a heavy interest burden. The agency also flagged political risks, contingent liabilities linked to state-owned enterprises, and persistent structural obstacles to growth.
For now, though, the direction of travel has changed.
After years of downgrades, South Africa has secured positive recognition from all three major ratings agencies. But the upgrade also highlights the task that remains ahead: turning fiscal progress into stronger economic growth, converting investment commitments into real investment, and dealing with the liabilities and structural weaknesses that still sit beneath the surface.
