The City of Cape Town is among some of South Africa’s metropolitan municipalities that were downgraded to junk status by credit ratings agency Moody’s on Friday.
Moody’s attributed the downgrade to uncertainty in the strength of revenue collection and increasing financial pressures faced by the municipalities.
“In this environment, the reviews for further downgrade reflect high uncertainty about the RLG’s (regional and local governments) capacity to secure financing well in advance of debt and other payments being due,” reads the report.
Moody’s however indicated that the City’s overall financial performance remains stronger than that of rated peers in South Africa.
The City of Cape Town has written to the rating agency Moody’s for further clarity on the City’s downgrade.
“The City is however of the opinion that its cash flows are resilient with a collection rate of 98,9% – a rate that is unprecedented among South African municipalities. This is in fact one of the reasons that Moody’s in a recent report on 10 June 2021 stated it was maintaining the City’s credit rating because of the metro’s ‘strong financial performance, supported by prudent financial management,” said Ian Douglas Neilson, executive deputy mayor of the City of Cape Town.
Other downgraded metros are the City of Ekurhuleni, the Nelson Mandela Metropolitan Municipality and the City of Johannesburg.