Moody’s Ratings appears to have overlooked the green shoots emerging in South Africa’s economy, economists said, after the agency left the country’s credit rating and outlook unchanged in its latest review.
Instead of formal action on Friday night, Moody’s offered a cautious assessment of the country’s progress on reform. Moody’s rates South Africa at Ba2 with a stable outlook.
“Rating agencies should give forward guidance. They shouldn’t just look in the rearview mirror,” Citadel chief economist Maarten Ackerman said, adding that Moody’s appears to have missed the signs of progress on the ground that S&P Global Ratings has already acknowledged.
The review followed S&P’s upgrade of South Africa’s foreign currency rating from BB minus to BB last month, while also raising its outlook to positive. The local currency long-term rating was also raised to BB+ from BB, one notch above Moody’s.
According to Ackerman, the economy has shown a notable shift this year, with growth no longer driven solely by commodities. He noted that key sectors are beginning to recover meaningfully.
PSG Financial Services chief economist Johann Els also thinks Moody’s has been “overly cautious”.
“What is particularly disappointing is that Moody’s kept their outlook statement unchanged at stable,“ Els said.
“There is more resilience than what everybody expected this year, and some of those positives [include] easing structural constraints — specifically electricity, but also in terms of what Operation Vulindlela has been doing [in] easing logistical constraints.”
According to Els, there are lots of positives on the fiscal side too, “which I don’t think Moody’s has taken enough account of”.
In his view, South Africa is on an upward trajectory and could see ratings upgrades in the coming years.
Moody’s pointed to longstanding bottlenecks, such as ageing infrastructure, a weak labour market and persistent inequality, as the major headwinds to stronger economic performance. These factors, the agency warned, continue to “complicate policy efforts and fuel social tension”.
However, there were glimmers of progress. In 2025, the economy showed signs of recovery. Improvements in electricity supply and more stable operations at ports and railways boosted output in critical sectors, including platinum group metals, gold, chromium, automotive and chemicals.
The agency expects this momentum to be supported by a gradual increase in investment, driven by structural reforms in the energy and logistics sectors. Nevertheless, external risks, such as geopolitical tension, trade disputes and domestic political uncertainty continue to cloud the outlook.
Moody’s assessed South Africa’s institutions and governance strength at “baa2”, citing robust core institutions such as the central bank and the judiciary. The country also benefits from a sound macroeconomic framework and a demonstrated commitment to fiscal discipline, though these are balanced against the drag of pervasive corruption.
Moody’s noted that inflation expectations are already gravitating toward the new 3% inflation target, a move that should ultimately support fiscal consolidation, investment and real economic growth.
In its medium-term budget policy statement (MTBPS) tabled in November, the Treasury forecast a narrower fiscal deficit of 4.5% of GDP in the 2025 financial year and 3.6% in 2026. Moody’s projects the 2025 deficit at 4.1%, citing unanticipated spending pressures, especially on interest costs.
The agency expects South Africa’s public debt burden to rise to about 87% of GDP in 2025, up from 83% in the previous year. A major contributor is the government’s provision of fresh guarantees to Transnet, whose deteriorating finances now factor directly into Moody’s debt definition.
Still, there was a silver lining: fiscal risks posed by state-owned entities (SOEs) “have diminished”, Moody’s said.
Moody’s expects growth to gradually accelerate, potentially reaching 1.8% by 2027, underpinned by reform progress and improved infrastructure performance. The agency’s stable outlook reflects expectations that while debt levels will remain elevated, they are likely to stabilise.
“Despite coalition frictions, we expect the government to ultimately reach compromises that allow key legislation to pass,” Moody’s said.
Moody’s said it could upgrade South Africa’s rating if growth outpaces expectations and leads to “a material reduction” in the debt burden. It said this would likely require clear, sustained operational and financial improvements in the energy and logistics sectors, and a significant and lasting rise in investment, especially in key network industries where the government is seeking greater private-sector participation.
Moody’s said a downgrade could follow if South Africa’s already subdued growth prospects were to deteriorate further, weakening fiscal strength.
A shift in the governing coalition toward parties promoting credit-negative policies, such as nationalising key sectors, would also damage institutional strength and deter investment.
Additionally, if the financial needs of state-owned enterprises exceed expectations, this too would weigh negatively on the rating.
Update December 6 2025 This story has been updated with economists’ reactions.
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