South Africa

The outlook on both the foreign and local currency ratings is stable, since South Africa's credit strengths--particularly a credible central bank, a flexible exchange rate, an actively traded currency, and deep capital markets--should help counterbalance relatively low medium-term economic growth and ongoing fiscal pressures. We could lower the ratings if South Africa's economy fails to recover during the forecast period and fiscal financing or external pressures mount. This could, for example, arise from further financing risks emanating from contingent liabilities, including the public electricity utility Eskom, or tightening financing conditions increasing the government's interest burden as a proportion of revenue. We could raise the ratings if economic growth is significantly higher than we currently expect over multiple years, leading to

...South Africa is experiencing a cyclical upturn in its near-term economic performance and current account position. Following a contraction of 6.4% in 2020, the economy has rebounded this year, with the relaxation of lockdown restrictions, re-opening of the economy, and an upturn in global commodity prices helping to improve terms of trade. S&P Global Ratings expects South Africa to post an annual current account surplus this year for the second consecutive year, as commodity prices are relatively high and imports are recovering only moderately. Higher-than-expected tax revenue, particularly from mining companies, will help to reduce the fiscal deficit and debt as a proportion of GDP more than previously expected. However, metals and minerals prices are softening, while slow progress on economic reforms could result in the economy reverting to low economic growth and small current account deficits. Despite fiscal measures to gradually reduce the budget deficit, government debt levels will...

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