Credit insurer Coface has kept South Africa’s country risk rating at C, which it describes as a high risk level. The rating appears in its latest Risk Review, titled Rates Against the Machine.
Coface expects South Africa’s economy to grow by only 1.0% in 2026. It sees growth improving slightly to 1.3% in 2027.
“While South Africa is expected to maintain positive growth, the outlook remains constrained by structural challenges and a difficult global environment,” said Aroni Chaudhuri, Coface’s Chief Africa Economist.
Chaudhuri said South Africa’s benchmark bond yield has stayed fairly steady despite stress in world bond markets. He said this was partly because public finances have improved.
He warned that this could change. “However, global risk-off episodes may happen in the coming quarters. Depreciation pressures on the rand would intensify, increasing inflationary pressures and prompting further monetary tightening,” he said.
According to the report, local businesses face a hard operating environment. Coface listed low demand, problems with logistics, ongoing inflation and global political tension as the main pressures.
Risk is not the same across all industries. Coface rated information and communication technology and pharmaceuticals as lower risk sectors in South Africa. It said transport and construction still face very high levels of risk.
The report said inflation remains a worry across Africa. Rising food and energy prices are the main drivers. Coface said the El Niño weather pattern could hurt food production and supply chains.
Most African economies saw only a short jump in inflation between April and June, the report said. It added that the risk of rising prices remains high going into 2027.
Coface said the world situation got worse during the South African winter. It pointed to renewed fighting between Iran and the US and a deeper conflict between Ukraine and Russia.
According to the report, these conflicts put supply chains under heavy strain. Oil prices rose by more than 50% and natural gas prices by almost 100%. Wheat prices were up 40% compared with a year earlier.
Central banks raised interest rates in response to fears of new inflation. Coface said the US Federal Reserve raised its rate by 25 basis points. The US dollar has gained more than 6% since mid-January, the report said.
Coface expects world growth of 2.5% this year, down from 2.8% in 2025. It forecasts 2.6% growth next year. It said spending on artificial intelligence has helped the world economy hold up so far.
“The prolonged conflict in the Middle East is reviving the risk of another global inflation shock,” said Jean-Christophe Caffet, Chief Economist at Coface.
In this review, Coface made three country downgrades and four upgrades. Saudi Arabia, the United Arab Emirates and Qatar were all downgraded because of risks linked to the Middle East conflict.
Coface also made 20 changes to its sector ratings, with 12 downgrades and eight upgrades. The agri-food sector was downgraded in six countries, including France, Austria, Poland and Argentina.
Source: this article is based on reporting by Business explainer. Image: Business explainer. Written with the help of AI and published by the Tzaneen Voice Business desk. See our Editorial Standards.
Anelisa Nkuna covers business and money news for Tzaneen Voice. Anelisa reports on the rand, fuel prices, interest rates, jobs, Eskom, Transnet, farming and company results. The aim is simple: explain what the numbers mean for household budgets, small businesses and workers in South Africa.