Ratings agency Fitch has again affirmed SA’s credit rating, saying that while the government of national unity (GNU) has provided short-term political stability and reform momentum continues, the country remains constrained by high debt levels and structural economic weakness.
Fitch’s rating of BB- with a stable outlook, indicates an elevated vulnerability to default risk.
In its latest report, released on Friday, Fitch said it expects the country’s real GDP to grow just 1.2% annually between 2025 and 2027, marginally up from 0.5% in 2024. The projected growth remains far below the 3.7% median for countries in the same BB ratings category.
“Growth is hampered by a slowly recovering logistics sector, weak investment, uncertainty over external trade relations and deeply entrenched structural factors, particularly high levels of inequality, poverty and unemployment,” the agency said.
High debt burden persists
Fitch flagged SA’s high and rising debt burden as a central weakness in its credit profile. Consolidated government debt rose to 78.1% of GDP in the 2024 fiscal year, and is projected to climb further to 79.6% by 2027 — significantly above the 2027 BB median of 54%.
Fitch said although debt is rising more slowly, the government’s use of cash reserves and modest spending cuts would not be enough to stop debt from increasing. The country also has little room to adjust its budget, with salaries and interest costs making up nearly half of all government spending in 2025.
Reforms underway but limited impact
The agency noted the continuation of reform efforts under Operation Vulindlela Phase 2, especially in electricity, logistics, water and digitalisation, which have helped reduce load-shedding and stabilise freight volumes. However, Fitch expressed scepticism about the long-term effect of reforms on growth potential.
“Nevertheless, we believe these reforms will not materially affect the deeply entrenched structural factors, including poor human capital, low labour participation partly hindered by geospatial fragmentation, and low investment, which drag on growth.”
GNU maintains fragile stability
Despite the fragile political configuration, the GNU is holding together following a “fractious budget approval process”, with Fitch noting “broad agreement on key economic priorities”. Still, it warned that relations remain fluid and that the 2026 municipal elections could pose a test for the coalition.
Fitch raised concern over the ongoing financial and operational struggles at Transnet. While rail and container volumes have improved under an 18-month recovery plan, the company recorded a R1.9bn net loss in its 2024 financial year.
“We expect Transnet will continue to rely on government guarantees to access funding,” Fitch said.
Inflation contained, rate cuts limited
Inflation remains contained, with headline inflation forecast to rise to 4.2% by end-2025, before easing again in 2026 and 2027, Fitch said.
The agency expects no further rate cuts this year, but believes there is room for easing in 2026 and 2027, under the Reserve Bank’s revised preference to target the lower end of its 3%-6% band.
Treasury plans major infrastructure investment
Commenting on the outcome, the Treasury said: “Government’s economic growth strategy will continue to focus on maintaining macroeconomic stability to reduce living costs and grow investment, executing reforms to promote a more dynamic economy, building state capability in core functions and supporting growth-enhancing public infrastructure investment.”
Over the medium term, it plans to invest more than R1-trillion in infrastructure, with reforms aimed at making it easier for both public and private players to invest in roads, rail, energy and water. The Treasury said major changes to state spending and the budget process are underway, including targeted savings across departments.
Further detail will be outlined in the medium-term budget policy statement (MTBPS) on November 12, the Treasury said.
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