Moody’s believes South Africa’s credit rating prospects are negatively impacted by poor investment

A top Moody’s analyst stated on Tuesday that if South Africa is to restore its credit rating to the investment grade level it lost half a decade ago, it must find ways to accelerate economic development.

“Any discussion regarding South Africa’s sovereign credit outlook must begin with economic growth,” Moody’s senior rating officer and lead analyst for South Africa, Evan Wohlmann, stated during a webinar for the media.

“There will be upward pressure on the rating if we see South Africa making significant progress in alleviating structural constraints on economic potential.”

On December 5, Moody’s will conduct its next evaluation of South Africa’s credit rating. With a stable outlook, South Africa is currently rated at Ba2.

Moody’s downgraded South Africa’s investment grade rating in March 2020.

Wohlmann added that the government’s efforts to implement reforms, like lowering regulatory barriers in the energy and logistics sectors, should help propel economic growth up from this year’s predicted 1% to about 1.6% next year. 

But poor investment is still a barrier, he said.

As per the 2025 World Investment Report of the United Nations Conference on Trade and Development, foreign direct investment in the nation dropped to $2.5 billion in 2024, which was 29% less than in 2023 and the lowest in seven years.

Private infrastructure spending, according to Moody’s, is still not enough to raise South Africa’s potential growth rate much over 2%.

Wohlmann warned that a decline in economic growth forecasts could put downward pressure on the grade, leading to decreased fiscal strength or setbacks in structural changes that indicate less effective policy.

Fitch grades South Africa at BB-, with a stable outlook, whereas S&P rates it at ‘BB-/B’ and has a “positive” outlook.