Two Upgrades In 12 Months: South Africa’s Credit Rating Renaissance

South Africa is climbing the sovereign ratings ladder again. On 5 June 2026, Fitch Ratings raised the country's long-term foreign and local currency credit ratings by one notch to BB from BB-minus, marking the agency's first upgrade of South Africa in almost 21 years. This follows S&P Global Ratings' one-notch upgrade in November 2025, when it lifted the foreign currency rating to BB and local currency to BB-plus, both with a positive outlook. Two sovereign credit upgrades from two different major agencies in barely seven months. That simply does not happen, not in South Africa, and not anywhere without something real having changed on the ground.

To understand why this matters, it is important to recall the period in which South Africa lost its investment-grade status. State capture, fiscal recklessness and weakening of key institutions over several years ultimately led all three major credit rating agencies to downgrade the country. The downgrades locked the country out of key global bond indices, pushed up borrowing costs and put an ice-cold chill on deal-making that lasted the better part of a decade.

Today, all three major rating agencies have South Africa at BB or Ba2 , two notches below investment grade, with Moody's and S&P both on positive outlook, meaning further upgrades could come within 12 to 18 months. Fitch cited prudent fiscal management, a transition from primary fiscal deficits to consistent and widening primary surpluses, improved revenue collection, disciplined expenditure management and ongoing reforms in the energy and logistics sectors. S&P pointed to stronger growth prospects, an improving fiscal outlook and reduced contingent liabilities following Eskom's improved performance. Whilst Fitch has been slow to the party, it has provided constructive and welcome validation of South Africa’s reform momentum.

The country has posted primary fiscal surpluses averaging approximately one per cent of GDP over the past four years. Its debt profile is characterised by a long average maturity of over ten years and a relatively low share of foreign-currency-denominated debt, which shields the sovereign from exchange rate shocks. South Africa's exit from the Financial Action Task Force (“FATF”) grey list in October 2025 further reinforced international confidence in the integrity of its financial systems.

Credit ratings are not just numbers for economists. For transactional lawyers, they shape whether deals happen, how they get structured and what they cost. The upgrades are already changing the ground beneath our feet.

The first thing any deal lawyer notices after a sovereign upgrade is what happens to the cost of debt. Better sovereign ratings mean cheaper borrowing, for government, for corporates, for households. When South Africa moves up the ratings ladder, even within sub-investment-grade territory, it narrows the spread that investors demand over benchmark rates. Following the S&P upgrade in November 2025, yields on South Africa's benchmark 2035 government bonds fell to record lows, declining to 8.60 per cent. We acted for National Treasury in that capital raise, where we marvelled at investor appetite in real time as the bonds went to auction. African countries have largely suffered disproportionally at the hands of rating agencies and so it is good to see a turning tide in an especially turbulent world where ‘superpowers’ are themselves showing more turbulence than African countries have in the recent past.

In practice, this feeds straight into the economics of leveraged buyouts, project finance and corporate bond issuances. Acquisition financing gets cheaper. Conditions precedent around funding certainty becomes easier to tick off. Margin ratchets in facility agreements, those clauses that adjust pricing when sovereign ratings move, start releasing capital. Banking and finance lawyers are already seeing lenders recalibrate their pricing grids and risk appetites for South African exposure.

But none of this happens in a vacuum. The US-Israel war against Iran, which escalated from late February 2026, has sent crude oil prices soaring and hammered import-dependent economies across the globe. South Africa, a net fuel importer, was hit hard. Fuel prices recorded one of the largest single-month spikes on record. The South African Reserve Bank had no choice but to act. On 28 May 2026, it raised the repo rate by 25 basis points to 7.0 per cent, the first hike since 2023, killing off an easing cycle that had brought rates down to 6.75 per cent just months earlier. The rand weakened more than six per cent against the dollar in the weeks following the outbreak of hostilities, and ten-year government bond yields rose by over 100 basis points.

And that is exactly what makes the Fitch upgrade so striking. It did not arrive during calm seas. It landed in the midst of a global storm. Fitch itself acknowledged the challenging backdrop, noting that five investment-grade sovereigns had received negative rating actions since the conflict began.

What does this mean for deal lawyers?

Many institutional funds have hard floors on the ratings they will touch. Moving from BB-minus to BB can open doors to pools of capital that were simply off-limits before. Pension funds, insurance companies and sovereign wealth funds whose mandates kept them out of lower-rated sovereigns can now look at South African debt and equity again. For capital markets lawyers putting together bond programmes, syndicated facilities and note issuances, the buyer pool just got bigger. The positive outlooks from Moody's and S&P suggest another upgrade could come within 12 to 18 months. If that happens, South Africa will sit just one notch below investment grade and the shift in institutional participation and pricing dynamics for South African corporate debt would be substantial.

Here is the thing that sophisticated investors already understand: you do not wait for investment grade to deploy capital. You position yourself before the upgrade comes. South Africa at BB, with all three agencies aligned and two of them on positive outlook, is a market where the risk premium still overcompensates for the actual credit trajectory. That gap between where the rating is and where the country is heading is where the returns sit. Deep capital markets, a sophisticated legal system, a regulatory framework that, whilst demanding, is predictable, and a government that has demonstrated sustained fiscal discipline through multiple external shocks. For those structuring inbound investments, project finance transactions, or cross-border acquisitions, the combination of improving sovereign creditworthiness, liberalising energy markets, and a streamlined JSE listings framework creates a window that will not stay this attractively priced for long.

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