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Picture: UNSPLASH.COM
Picture: UNSPLASH.COM

If SA delivers higher GDP growth and a declining debt trajectory, the country could move up two notches in its credit ratings, Tatonga Rusike, Sub-Saharan Africa economist at Bank of America Global Research, told journalists at a media round-table on Thursday.

Rusike, a former senior sovereign credit ratings analyst at S&P Global, responded to a question by Business Day.

“If we indeed are getting stronger GDP prints, then it is possible for S&P to review again in November 2025 and into 2026 to get rating upgrades. So we do see that the next three years, if we do deliver on GDP growth and debt declining, it is possible to get up two notches in a period of three years,” he said.

“Growth of at least 1.5% of GDP on an annual basis over the medium term is good enough.” 

The three major credit ratings agencies classify SA as subinvestment grade, or “junk” status.

In November, S&P Global revised the outlook on the sovereign rating to “positive,” citing improved reform prospects under GNU and a boost in business confidence. This shift has fuelled speculation ratings upgrades might be on the horizon.

During the briefing, Rusike also shared their outlook on SA, referencing a report he called the “Five G’s You Need to Know”.

First, they project a stable year for the government of national unity (GNU) despite public frictions.

Second, they forecast GDP growth improving to 1.6% this year, compared with less than 1% in both of the previous two years.

“We do see improvements coming from reduced power cuts or no load-shedding, and then also the GNU confidence turning into domestic investment, with improving consumption, helping to place growth on a higher path,” he said.

“Continued reforms will also help with stimulating domestic investment, particularly in the logistics sector.”

The third “g” is global uncertainty. “I think we still see inflation below target, so that means the SA Reserve Bank still has some room to cut,” he said.

This week, consumer inflation edged up slightly to an annual rate of 3% in December from 2.9% in November. The monetary policy committee (MPC) meeting is scheduled for next week.

“We do see a cut in January, but beyond January, we think that global risks will probably come to the fore.” As a result, he noted, they no longer expected a rate cut in March.

Based on these risks, Rusike projected inflation to rise above 4.5%, the central bank’s target towards the end of the year.

The fourth “g” focused on geopolitics. “There have been issues around the foreign policy of SA that clashes with the US. So, that could come to the fore, quite a lot more than we have seen recently,” he said.

However, Rusike does not foresee SA facing penalties for these differences.

“We do think that there may not be penalties for SA. That is an opportunity to adjust, particularly on these issues where there’s been differences, with regards to Russia, with regards to Israel, for example. So there will be opportunities for the GNU to share policy and adjust to avoid any negative penalties.”

He added much of the discussion about potential impacts will centre on Agoa, the US-Africa free-trade agreement. While Agoa-related trade numbers are relatively small, SA’s export base is highly diversified.

“As a result, the macroeconomic impact may not be significantly negative,” Rusike said. However, he cautioned the narrative could affect financial assets, particularly currencies and broader financial markets, which warrants close monitoring.

The fifth “g” addressed the increasing supply of government bonds. Rusike noted fiscal performance for the fiscal year, which ends in March, is in line with Treasury estimates.

“You will see that you also have financing, particularly for Eskom, that is not included in the headline deficits, but that is also financed by borrowing.”

marxj@businesslive.co.za

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