Global credit ratings agency pulling out of South Africa

The Prudential Authority of South Africa is set to remove Moody’s Investors Service South Africa (Moody’s Ratings-SA) as an eligible External Credit Assessment Institution.

The decision followed the Financial Sector Conduct Authority (FSCA) cancelling Moody’s registration on 16 April 2026, after it had voluntarily renounced its registration in South Africa.

Moody’s Ratings-SA is one of South Africa’s largest credit rating agencies, providing creditworthiness assessments of businesses and debt instruments since it was licensed in 2014.

In a recent notice, the Prudential Authority informed all banks, branches of foreign institutions, controlling companies and auditors of banks that it intended to derecognise Moody’s Ratings-SA.

“The Prudential Authority intends to derecognise Moody’s Investors Service South Africa (Pty) Ltd as an eligible external credit assessment institution,” it stated.

In South Africa, external credit ratings that may be used for capital purposes must be issued by a credit rating agency that is recognised as an eligible External Credit Assessment Institution (ECAI).

“Banks are required to map their exposures to ratings issued by eligible ECAIs, in accordance with regulation 23 of the Regulations relating to Banks (Regulations).”

According to the notice, Moody’s will be deregistered as an eligible ECAI effective 24 months from the date of the publication of the FSCA notice. This will take place on 16 April 2028.

Banks have 24 months to continue using Moody’s credit ratings. After this period, the Prudential Authority intends to issue a directive enforcing the derecognition of Moody’s Ratings-SA.

The FSCA explained in its initial notice that Moody’s informed the authority that it no longer wanted to be registered as a credit rating agency in South Africa. The authority, therefore, cancelled its registration.

The Prudential Authority, which relies on Moody’s credit ratings, was consulted by the FSCA before the authority issued the deregistration.

According to the FSCA, Moody’s is still required to ensure continued compliance in its last 24 months in South Africa before it is officially removed as an eligible ECAI.

The authority said that this included, “where appropriate, audit trails of its credit rating services for a minimum period of five years from the date of the service or the published rating.”

Moody’s must now also notify all rated entities and issuers that it is no longer registered as a credit rating agency in South Africa.

Moody’s gives South Africa a Ba2 rating

Moody’s conducted reviews of the credit ratings of several high-profile South African entities, including the government of South Africa, which it rated Ba2 in 2024, denoting a “stable outlook.”

“The Ba2 ratings affirmation reflects South Africa’s credit strengths from effective, core institutions such as the judiciary and the central bank, a robust, deep financial sector and a solid external position,” it said.

“It also acknowledges chronic challenges posed by the country’s extensive inequalities, which hamper reform progress and fuel social risk, as well as persistent structural constraints on economic growth.”

Moody’s indicated that, despite small improvements, South Africa’s economic growth was likely to remain subdued. It projected a gradual real GDP growth of 1.7% in 2025/2026, up from 1.1% in 2024.

It said that the gradual increase in GDP growth was driven by domestic demand, less restrictive monetary policy and continued favourable commodity prices.

“We expect the energy sector to increasingly drive private sector investments. However, this level of growth is unlikely to significantly reduce unemployment or mitigate social pressures,” it added.

Despite sluggish growth, it said that South Africa would remain economically stable, maintain a stable debt burden, and continue to face balanced risks. It had a relatively optimistic outlook on the future.

“We expect the GNU will continue to pursue structural reforms to alleviate current growth bottlenecks resulting in a very gradual uptick in growth to around 2%.”