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Eskom lights the way to SA’s first credit ratings upgrade in 20 years

It's another feather in Finance Minister Enoch Godongwana’s fedora, and caps a week in which his Medium-Term Budget Policy Statement was broadly welcomed by markets, sending the rand to its best levels against the greenback in 2025.
Eskom lights the way to SA’s first credit ratings upgrade in 20 years Illustrative Image: Eskom power lines. (Photo: Julia Evans) | Stock exchange. (Image: Freepik)
Ed Stoddard
By Ed Stoddard
16 Nov 2025
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S&P Global Ratings lifted South Africa’s credit rating on Friday and maintained a positive outlook for future upgrades, citing Eskom’s improved performance and a brightening fiscal and growth outlook.

“The upgrade reflects South Africa’s improving growth and fiscal trajectory, alongside the reduction in contingent liabilities largely tied to performance improvements at the state-owned electricity utility, Eskom,” said the ratings agency.

The upgrade — South Africa’s first since 2005 — takes South Africa’s S&P rating up one notch to BB. There are two more to go to pull it out of “junk status” and back into coveted investment grade territory.

This marks another feather in Finance Minister Enoch Godongwana’s fedora and caps a week in which his Medium-Term Budget Policy Statement (MTBPS) — with its bold reduction in the SA Reserve Bank’s inflation target — was broadly welcomed by markets, sending the rand to its best levels against the greenback in 2025.

Minister of Finance Enoch Godongwana tables the Medium-Term Budget Policy Statement in Parliament. (Photo: Phando Jikelo / RSA Parliament)
Minister of Finance Enoch Godongwana tables the Medium-Term Budget Policy Statement in Parliament. (Photo: Phando Jikelo / RSA Parliament)

Read more: Rand hits 2025 high on inflation target but growth and debt worries remain

“The positive outlook reflects the potential for further improvements in fiscal metrics and government debt stabilisation if the coalition government continues its fiscal consolidation. The outlook also reflects the possibility of stronger growth than we currently expect,” said S&P.

S&P pointedly noted that South Africa’s risk from “contingent liabilities will ease as state-owned enterprises (SOEs) are likely to require less financial support going forward”.

The positive outlook could get a downgrade to stable if economic and governance reforms come off the rails, while another upgrade could be in the offing if reforms herald stronger economic growth and a reduction in “fiscal imbalances”.

What this means

South Africa’s long, hard struggle to contain swelling debt levels and make the likes of Eskom and Transnet functional again is finally paying off, but a return to an “investment grade” rating remains a long way off.

Still, an upgrade raises the prospects of lowering the costs of borrowing because it reduces South Africa’s risk profile. The rand may add to its recent gains this week, and with a brightening outlook, the SA Reserve Bank could decide to cut rates again this week at its last scheduled meeting this year for its Monetary Policy Committee.

S&P expects South Africa’s economy to grow by 1.1% this year, with growth averaging 1.5% annually from 2026 to 2028 — lower than the Treasury’s current forecasts of 1.2% and 1.8%, respectively. But even that more subdued growth outlook led to an upgrade.

“Broad reform momentum has picked up pace,” said S&P. “The electricity sector has seen significant reforms and a sharp improvement in levels of energy supply, with load shedding down sharply from previous years and no load shedding having been witnessed in the last 170 days.

Read more: Eskom posts first profit in eight years, of R16-billion, as turnaround gains traction

“Nevertheless, issues around arrears owed to Eskom by municipalities continue to pose significant risks to its turnaround. Reforms of the state-owned rail and port utility, Transnet, are also ongoing... However, it continues to post losses and continues to require some support as well as government guarantees.”

The MTBPS projects government debt to peak at 77.9% in the current fiscal year ending on March, up slightly from the May forecast of 77.4%. Sticking to that target will be among the keys to future upgrades from S&P and its peers.

In a difficult, slow-growth domestic environment and a global economic landscape that is shrouded in uncertainty, South Africa has done well to secure an upgrade. It’s not quite a Springbok performance, but the Treasury, like the Welsh rugby side, will take any win it can get these days. And it can’t afford any more red cards. DM

Comments

Nov 17, 2025, 08:33 AM

Maybe somebody should tell Zwelenzima Vavi about this. All he saw in the budget was rich white owned corporations making money at the expense of workers in his SAFTU trade unions. Most of these "rich white owned corporations" actually have shared black/white ownership Mr. Vavi and without them your union members would have no employment.

Maria Janse van Rensburg Nov 19, 2025, 06:53 AM

Thanks to the turnaround at Eskom all the money spent by private households, business and government on diesel and other methods to provide power can now be utilised for other priorities. Money back in the pockets of households and businesses can be used for creating opportunities for the unemployed. If the same turnaround can be achieved to reduce extra spending by individuals on education, private security, expensive transport and health, more money will be freed up to create opportunities.