S&P Global Ratings has warned that rising geopolitical tensions in the Middle East, and the resulting pressure on global oil prices, could heighten economic risks for South Africa, while also highlighting the country’s persistently weak growth performance compared with other emerging markets.
The agency said higher oil prices would likely transmit quickly into South Africa’s domestic economy due to its reliance on imported fuel. This would feed into transport costs, food prices, and broader inflation, placing additional strain on households already facing weak income growth and elevated living costs.
S&P noted that while South Africa has made some progress on fiscal consolidation, its growth outlook remains structurally weaker than peers. The economy continues to struggle with low investment levels, infrastructure bottlenecks, and ongoing challenges in energy supply, all of which limit its capacity to expand at a faster pace.
The ratings agency described South Africa’s growth trajectory as an “outlier” among comparable emerging markets, pointing out that many peers have managed stronger post-pandemic recoveries. In contrast, South Africa’s expansion has remained subdued, reducing its ability to generate sufficient tax revenue and meaningfully lower unemployment.
According to the assessment, external shocks such as oil price spikes tend to have an amplified impact in economies with weak growth foundations. In South Africa’s case, higher fuel costs could further erode consumer purchasing power and slow already fragile demand.
S&P added that inflation risks remain closely tied to global energy developments. A sustained rise in oil prices would likely complicate monetary policy decisions, potentially forcing the central bank to maintain tighter interest rates for longer to keep inflation expectations anchored.
However, tighter monetary conditions could also weigh on economic activity, creating a difficult policy trade-off between price stability and growth support. This tension is particularly relevant in an environment where domestic demand remains weak.
Despite the concerns, S&P did not signal an immediate change to South Africa’s credit rating outlook. The agency acknowledged that ongoing fiscal reforms and efforts to stabilise public finances have provided some support to credit fundamentals.
The broader risk, however, is that prolonged geopolitical instability in energy markets could worsen South Africa’s macroeconomic vulnerabilities. Higher import costs, weaker growth, and limited fiscal space could combine to slow progress on structural reforms and economic recovery.
Across emerging markets, energy-importing economies are expected to remain most exposed to oil price volatility. For South Africa, the challenge is amplified by its already sluggish growth trajectory, which leaves little room to absorb external shocks without broader economic consequences.
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Emmanuel Abara Benson is a business journalist and editor covering artificial intelligence, global markets, and emerging technology.
He has previously worked with Business Insider Africa and Nairametrics, reporting on finance, startups, and innovation.
His work focuses on AI, digital economy, and global tech trends.
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