South Africa takes the global stage as credit upgrade confirms reform momentum - BLSA

This is a big week for South Africa, as we host the leaders of many of the world’s biggest economies at the G20 meetings, while business leaders from across the world meet at the B20 Summit. This comes hot on the heels of an upgrade in our sovereign credit rating by S&P Global from BB- to BB, which maintains a positive outlook. These provide both the opportunity and the evidence to demonstrate to the world that South Africa is back in business.

We have a government that is starting to regain control of the nation’s finances and turning the trajectory toward sustainable, growth-supporting fiscal management. The medium-term budget policy statement last week showed continued fiscal discipline, with Treasury on track to deliver another primary surplus despite weak growth.

We have a financial system that is appropriately vigilant about abuse, putting us back in good standing with the Financial Action Task Force. Our exit from the FATF grey list in October was recognition of the work done to strengthen our anti-money laundering and counter-terrorism financing frameworks. These are not just bureaucratic achievements – they matter for our ability to attract investment and participate fully in global financial markets.

And this week, we can engage with the world about the great work that has been done to contribute to policy advances under our chairmanship of the G20. While the G20 takes place amid higher geopolitical tensions than we would have liked, South African hosts have managed this as well as could be expected. The Trump administration has said it will not send a delegation, though other US political leaders will attend. This is unfortunate, particularly as the US will be chairing the G20 next year. But it also provides a stark illustration to the political leaders who will be attending of why we need to act to protect the rules-based trading system that is key to international prosperity. Those nations assembled will have the opportunity to back solutions to minimise the harm from tariffs that have been imposed on much of the world.

The G20 remains a critical forum for the world’s biggest economies to engage on how to evolve the rules for multilateralism to ensure our mutual prosperity. BLSA and BUSA have jointly chaired the B20 process, the business forum for engaging with the G20, which kicked off in March. Since then, eight task teams, each headed by a senior South African business leader, have developed detailed recommendations to feed into the G20 process.

Working with the overall theme of the G20 this year, “inclusive growth and prosperity through global cooperation”, the B20 has developed 30 recommendations across the task teams. These cover everything from digital transformation to employment and education, from improving the global trade environment to infrastructure finance and debt management. The recommendations focus on transitioning to clean energy, agricultural innovation, and industrial growth in Africa. Several address disruptions to trade which have been particularly damaging to South Africa, with our presidency advocating for new trade and investment deals for Africa as well as climate-responsive trade.

Importantly, the B20 recommendations are sound and independent of the politics that have affected the G20 itself. They are evidence-backed with key performance indicators and ready for implementation. There is an opportunity for South Africa to leave a lasting legacy from this work, and I hope the recommendations will be embraced by the G20 for concrete action.

One legacy that is sure to last will be our reputation for hosting excellent global events. The political and business leaders visiting our shores will have the opportunity to engage with South Africa first hand and form new relationships. The message that we are open for business cannot be missed.

The timing could not be better – S&P Global’s decision on Friday to upgrade South Africa’s credit rating provides an independent verdict on the progress we have made. The announcement noted South Africa’s improving growth and fiscal trajectory, and the reduction in risks related to Eskom. It noted that reform momentum has picked up pace, crediting Operation Vulindlela for progress particularly in the electricity sector and noting the progress with Transnet, including the concessioning of rail capacity. It also highlighted as strengths our sophisticated financial system, strong independent institutions like the South African Reserve Bank, and the positive support the Government of National Unity has shown for growth-enhancing reforms.

However, S&P does point to clear risks, including the still high debt levels, the stability of the GNU, US-imposed tariffs, municipal debt to Eskom and the persistent low growth story. But despite these reservations, S&P is maintaining a positive outlook, showing it believes the risks are to the upside. The S&P decision supported a further rally in South African markets which have reflected strongly positive sentiment since the MTBPS last Wednesday. The upgrade was recognition that the fiscal management demonstrated in the MTBPS is sustainable and credible.

It is important to note that while this upgrade is welcome progress, South Africa remains below investment grade. The BB rating still places us in sub-investment grade territory, two notches below the BBB- threshold that would restore investment grade status. Achieving investment grade should be our clear focus. The catalysing impact would be substantial – opening access to a much broader pool of institutional investors whose mandates require investment grade ratings, significantly lowering our borrowing costs, and sending a powerful signal about South Africa’s stability and reform credibility. Investment grade status would unlock capital flows that could accelerate infrastructure development and economic transformation.

The challenge for all of us is to deliver on the upside that S&P notes is possible, and to pursue the reforms that will get us to investment grade. Business must accelerate investment in response to the improved infrastructure and regulatory environment. Government must maintain reform momentum, concluding Eskom unbundling, bringing in private investors into the logistics system, and implementing the reforms needed to improve local government delivery. Neither can succeed without the other – this is a partnership that requires sustained commitment from both sides.

Both the B20 and G20 will be our opportunity to show the progress made, catalyse global interest in our growth story and doing business with South Africa, and entrench global action to support multilateral solutions to our collective challenges. We are a country on the rise. The foundations have been laid through difficult reforms and disciplined fiscal management. Now we must build on them with urgency and determination, keeping our eyes firmly on the prize of investment grade status. This week, the world is watching – and we have every reason to be confident in what they will see.

Busiswe Mavuso is the chief executive of Business Leadership South Africa

*** The views expressed here do not necessarily represent those of Independent Media or IOL.

BUSINESS REPORT