GDP Data, Fitch Upgrade: Growth Remains Biggest Challenge

South Africa’s gross domestic product (GDP) grew 0.5% quarter-on-quarter in the first three months of 2026, Statistics South Africa data showed. The figures follow shortly after Fitch Ratings upgraded South Africa’s sovereign credit rating from BB- to BB. The ratings agency attributed the decision to improved fiscal discipline, debt stabilisation and progress on structural reforms.

According to Thys van Zyl, Chief Executive Officer of Everest Advisory Services (Pty) Ltd (FSP 49495, CAT I), the latest developments are positive, but they are not yet sufficient.

“While any positive growth should be welcomed, a growth rate of less than 2% remains inadequate for a country facing South Africa’s challenges. At this pace, it will be extremely difficult to meaningfully reduce unemployment, increase income levels and alleviate fiscal pressure on the state.”

Van Zyl says the credit rating upgrade suggests that some market participants and rating agencies are increasingly recognising the progress being made in stabilising government debt.

“The credit rating upgrade is important news for South Africa. It sends a positive signal to international investors that the country’s fiscal management has improved and that reforms in certain sectors are beginning to bear fruit. This is an important step towards rebuilding confidence.”

“Fitch specifically referred to larger primary budget surpluses, improved debt prospects and reforms in infrastructure, energy and logistics. This suggests that policy consistency and fiscal discipline can contribute positively to fiscal outcomes and investor confidence.”

Van Zyl says the most important lesson from both the GDP data and Fitch’s upgrade is that economic growth remains the determining factor for South Africa’s long-term prospects.

“Fitch expects economic growth to remain well below that of comparable emerging markets over the coming years. The message is clear that South Africa cannot rely solely on improved fiscal management and that much stronger economic growth is required.”

According to Van Zyl, the focus should now shift towards the accelerated implementation of reforms that will promote productivity, investment and business confidence.

“The positive impact of reforms in certain sectors is already becoming visible, but the process needs to accelerate. Infrastructure development, greater regulatory certainty, improved state capacity and stronger private-sector investment will be essential if South Africa is to achieve higher levels of economic growth.”

Van Zyl believes the latest credit rating upgrade should serve as encouragement, but that the hard work still lies ahead.

“The good news is that South Africa has demonstrated that progress is possible. The challenge now is to maintain the momentum. If reforms continue and stronger economic growth can be unlocked, South Africa may be better positioned to attract additional investment and could improve its prospects for further credit rating upgrades.”