Moody’s Investors Service has downgraded the City of Ekurhuleni and Nelson Mandela Metropolitan Municipality flagging weak operational performance and material financial pressure.

But has had a positive assessment for the cities of Cape Town, Johannesburg and uMhlathuze but a negative outlook still remains.

The credit rating agency concluded the review it started in July this year.

Moody’s says it expects the City of Ekurhuleni’s operating performance to continue being weak in the coming years.

It says the rationale for the downgrading by one notch is further deterioration of the city’s liquidity position which is reflected in its deteriorating ability to meet its debt obligations

Water crisis

Nelson Mandela Metropolitan Municipality has been downgraded due to significant challenges associated with its infrastructure backlog, particularly the water crisis that has escalated.

Moody’s says though Nelson Mandela Bay has demonstrated some resilience in liquidity, it notes a significant drop in its operating revenue from 13% to 6%.

More encouraging are the assessments for the Cities of Cape Town, Johannesburg and Umhlathuze.

Moody’s expects the three cities to maintain positive operating balances in the medium term, placing them in favourable positions to raise external funding.

Despite this, the rating agency says all the outlooks are negative. It says persistent low economic growth of the country continues to weigh on revenue collection.

It warns that even though the country has moved down to the lowest level of lockdown, the financial strain that the low growth environment has had on household income and thus revenue collection is evident.

Moody’s cautions that a rating upgrade is unlikely, but will consider stabilising the outlooks of the individual municipalities if they display robust ‘ operating performance and liquidity resilience.

Moody’s downgrades City of Ekurhuleni and Nelson Mandela Metropolitan Municipality: