An economist at Municipal IQ, Karen Heese, says rating agency Moody’s has downgraded five South African municipalities due to rising liquidity pressures, as a result of shortfalls in revenue collection.
Municipal IQ is a web-based data and intelligence service specialising in the monitoring and assessment of all municipalities. Moody’s says Johannesburg, Cape Town, Nelson Mandela Bay, Ekurhuleni, and uMhlathuze municipalities are likely to draw down on cash reserves, eroding their capacity to absorb future shocks.
Heese says the country’s largest metros need to redirect their responsibilities to revenue collection, as she explains what informed Moody’s decision.
“ It is deeper into junk and the problem there is that for the metros they do need to raise the majority of their own revenue and they would be looking at capital infrastructures, they know we need things such as water, rehab projects, sanitation, and all the big items those would be raised from the capital markets. So it means it is going to be more expensive when funding is available for those much-needed resources. For municipalities, they must focus on the professional responsibilities and core issues like revenue collection which is why the downgrade took place.”