South Africa’s financial sector is preparing for a significant transition as global credit ratings agency Moody’s Investors Service South Africa moves toward exiting the country’s regulatory system.
The Prudential Authority has announced plans to withdraw Moody’s Ratings-SA’s status as a recognised External Credit Assessment Institution (ECAI), following the cancellation of its registration by the Financial Sector Conduct Authority (FSCA) earlier in April 2026.
This development comes after Moody’s voluntarily relinquished its licence to operate as a credit rating agency in South Africa, marking a notable shift in the country’s credit ratings landscape.
Transition period for banks and financial institutions
Under current regulations, banks in South Africa are required to rely on ratings issued by approved ECAIs when assessing capital requirements and risk exposures.
To allow for an orderly transition, regulators have granted a 24-month window during which Moody’s ratings can still be used. The derecognition is scheduled to take effect on 16 April 2028, after which financial institutions will need to rely on alternative recognised agencies.
Authorities have indicated that a formal directive will be issued at the end of this period, enforcing the complete removal of Moody’s ratings from regulatory use.
During the transition, Moody’s will be required to maintain compliance with regulatory standards, including keeping detailed audit records of its rating activities for a minimum of five years and notifying all affected entities of its deregistration.
Economic outlook remains cautiously stable
Despite its withdrawal from the local regulatory framework, Moody’s recent assessments of South Africa’s economy continue to offer insight into the country’s financial standing.
In 2024, the agency affirmed South Africa’s sovereign credit rating at Ba2 with a stable outlook. The rating reflects a mix of institutional strengths — including a well-established judiciary, an independent central bank, and a deep financial sector — alongside persistent structural challenges.
These challenges include high levels of inequality, constrained economic growth, and ongoing social pressures, all of which continue to influence the country’s reform trajectory.
Moody’s projections suggest that South Africa’s economic growth will gradually improve, with real GDP expected to rise to around 1.7% in 2025 and 2026, up from 1.1% in 2024. The recovery is expected to be supported by domestic demand, easing monetary conditions, and favourable commodity prices.
However, the agency cautioned that such growth levels are unlikely to significantly reduce unemployment or fully address socio-economic tensions.
Looking ahead, Moody’s expects the Government of National Unity to continue implementing structural reforms aimed at easing growth constraints, with the potential for gradual improvement toward a 2% growth rate over time.
Source: Prudential Authority and FSCA notices, Moody’s reports
