Downgrades spread to South Africa’s major metros threatening jobs
The DA said it is concerned that the credit ratings of South Africa’s major metros and local governments are under threat, which will impact jobs and infrastructure development.
Moody’s has placed the cities of Johannesburg, Ekurhuleni and Cape Town on review for a downgrade of their global scale short-term rating and global scale long-term rating.
“Downgrades, through no fault of the local governments themselves, would mean that the cost of servicing debt will rise, and this will take funds from service delivery and job creation.
“This directly undermines service delivery, and is a direct effect of Jacob Zuma’s actions. As more money will now be spent on repaying debt, less money will be spent on services and infrastructure,” said DA shadow minister of COGTA, Kevin Mileham.
Moody’s said in a statement that its rating actions followed the potential weakening of the South African government’s credit profile, in particular in the country’s institutional, economic and fiscal strength.
“Protracted political tensions that generate policy uncertainty might put pressure on their overall financial performances,” the ratings agency said.
Mileham said the threat of downgrades will immediately affect the investor perceptions of these governments, at a time when investment is sorely needed.
“It will now be harder for these governments to attract investment, and to negotiate in the debt market; but in the local governments where the DA governs we will continue to pursue investment tirelessly.”
Joburg mayor, Herman Mashaba, also expressed concern over Moody’s rating alert.
“For the City of Joburg, a downgrade in our rating will strangle our efforts to attain our 5% economic growth target needed to stimulate job creation and improve service delivery to our residents.
“In addition, 34% of our city’s capital budget is funded through long term debt and bonds. Allocations within this capital budget are used to finance the city’s massive R170 billion infrastructure backlog,” Mashaba said.
A downgrade in our rating will thus raise the cost of debt, resulting in the city spending more money to service debt instead of investing in infrastructure and providing quality public services, the mayor said.
He noted that Moody’s upgraded both the global and national scale ratings of the City of Johannesburg by four notches in March last year.
“To now face a potential downgrade through no failing of the city, but as a result of failures within national government undermines the hard work of civil servants within the City and betrays residents’ trust in government.
Read: What financial experts say about South Africa being junked
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