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SA gets a (ratings) upgrade!

We’ve delivered depressing news about our economy in the last couple of weeks (blame the war in Ukraine and the continued aftershocks of the pandemic). This week we have some good news: rating agency Moody’s upgraded South Africa’s credit outlook to stable from negative. If all you can think about is Beyoncé’s 2006 hit “Upgrade u” or the process of getting a new iPhone, don’t worry – we’re here to unpack what it all means.

Moody’s is essentially saying that it thinks South Africa’s long-term ability to pay off its debt has improved. As a result, we can access better interest rates when lending money, much like you can with a good personal credit score. (We’ve previously explained credit ratings in detail on our site.) Moody’s based its outlook on the commodities boom, the gift that keeps on giving and which continues to boost our mining sector. It was also impressed by South Africa’s commitment to reprioritise and reduce spending. 

The agency’s outlook makes us attractive to investors; this may strengthen the rand too but we’ll have to work a little harder to get the economy on truly firm ground. It’s not enough to rely on the commodities boom, which is cyclic and could change at any point. Treasury (and government) now need to get and keep their ducks in a row – no corruption scandals, no debilitating looting and no collapsing SOEs. That’s the only way to reach investment grade in the foreseeable future, a goal that would make us attractive to investors and inspire them to pour money into the country. The economy is ripe enough to start blooming again. Let’s hope it’s watered responsibly. 

This article appeared as part of The Wrap, 8 April  2022. Sign up to receive our weekly updates.