Moody’s Investors Service took rating action on five South African regional and local governments (RLGs) and government-linked issuers (GRIs) on July 16.
The city of Johannesburg is one of the RLGs that has been decommissioned. The others are the city of Ekurhuleni, the city of Cape Town, the Metropolitan Municipality of Nelson Mandela and the city of uMhlathuze.
The downgrades reflect growing liquidity pressure due to significant shortfalls in revenue collection that Moody’s expects to continue against a backdrop of very weak growth. South African RLGs are likely to tap into liquidity reserves with different starting positions, eroding their ability to absorb future shocks.
In this environment, revisions for further downgrading reflect a high degree of uncertainty about the ability of RLGs to secure financing well in advance of the maturity of debt and other payments.
City media relations manager Nthatisi Modingoane said the city was not happy with the downgrade as no physical assessment had been 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 global approach for all municipalities. The City has engaged the rating agency in this regard and has indicated that it will come back later for a thorough assessment, which the City will wait for, ”he said.