Moody's Ratings says South Africa is heading towards its first credit rating upgrade from the agency since 2009, as long as the government's finances keep improving. "We could upgrade South Africa's rating if fiscal performance continues to improve," Moody's vice president Evan Wohlmann told a media briefing on Tuesday.

Moody's rates South Africa Ba2, two notches below investment grade, and moved its outlook from stable to positive in May.

Moody's is the last of the three big agencies to signal an upgrade. S&P Global Ratings raised South Africa one notch in November 2025, to BB for foreign currency debt, and kept a positive outlook. Fitch followed in June 2026 with an upgrade to BB, its first upgrade of South Africa in almost 21 years. All three now rate the country two notches below investment grade, often called junk status.

Moody's says South Africa has reached a turning point after stabilising its debt and delivering reforms that support growth. Government debt peaked at 87% of GDP last financial year, and Moody's expects it to fall gradually to 84% by the end of the decade. Wohlmann said the risk of policy reversal after the 4 November municipal elections was limited, citing the coalition government formed in 2024.

The odds are reasonable but not certain: Moody's upgrades about 60% of the countries it puts on a positive outlook. A full return to investment grade will take time. Moody's senior vice president Lucia Villa said downgrade cycles typically move about twice as many notches a year as upgrade cycles. It took eight years for South Africa to fall from Baa2 in 2012 to below investment grade in 2020.

The next test is Finance Minister Enoch Godongwana's medium-term budget statement on 21 October, while the IMF cut its forecast for South Africa's growth this year to 1% last week.

Moneyweb and Daily Investor carried Bloomberg's report of the Moody's briefing, including Nedbank's forecast that growth could edge up to 1.9% over the next two years and 2.5% by 2030. Law firm ENS noted that yields on South Africa's benchmark 2035 government bond fell to a record low of 8.6% after the S&P upgrade, a sign of how quickly markets reward an upgrade. IOL stressed that a positive outlook does not guarantee an upgrade, and that the government must show the improvement in its finances can last.

A sovereign rating sounds distant, but it feeds into everyday costs. When the government can borrow more cheaply, bond yields fall, and that tends to pull down the cost of borrowing for banks and companies too, as the drop in bond yields after S&P's upgrade showed.

The bigger prize is investment grade. As we explained when the African credit rating agency launched, many pension funds and large investors are not allowed to hold debt below investment grade at all, so crossing that line opens South Africa to a much larger pool of money.

We are still two notches away with every agency, and Villa's point about slow upgrades is worth taking seriously. The realistic picture is a gradual climb, measured in years, that depends on Treasury sticking to its plan.

The 21 October budget statement is the next real signal. If it shows the primary surplus growing and spending under control, an upgrade from Moody's becomes more likely. If it slips, the positive outlook can be withdrawn just as easily.

You might also like our piece on what SA investment tax takes from gains and dividends, the Constitutional Court striking down the Public Procurement Act, and Eskom ruling out electricity price cuts.

Get more SA tech and business news and subscribe to The Open Letter.