Moody’s downgrades the City of Johannesburg
The rating downgrades reflect rising liquidity pressure as a result of material shortfalls in revenue collection that Moody's expects to last in the context of very weak growth
Moody’s Investors Service has taken rating actions on five South African Regional and Local Governments (RLGs) and Government-Related Issuer (GRI) on July 16.
The City of Johannesburg is one of the RLGs that was downgraded. Others are the City of Ekurhuleni, the City of Cape Town, Nelson Mandela Metropolitan Municipality and the City of uMhlathuze.
The rating downgrades reflect rising liquidity pressure as a result of material shortfalls in revenue collection that Moody’s expects to last in the context of very weak growth. South African RLGs are likely to draw down on cash buffers with different starting positions, eroding their capacity to absorb future shocks.
In this environment, the reviews for further downgrade reflect high uncertainty about the RLGs’ capacity to secure financing well in advance of debt and other payments being due.
The City’s media relations officer, Nthatisi Modingoane, said the City is not happy with the downgrade as no physical assessment was done to establish the impact of Covid-19 on the City of Johannesburg, as well as its response to the effects of the pandemic.
“The rating agency applied a blanket approach for all municipalities. The City has engaged the rating agency in this regard and it has indicated that it will be coming back at a later for an in-depth assessment, which the City will await,” he said.
