Bloemfontein - International credit ratings company Moody’s has withdrawn the long-term national scale issuer ratings of 10 South African municipalities, the company announced.
The municipalities are Breede Valley, George, Greater Tzaneen, Knysna, Lephalale, Maluti-A-Phofung, Matlosana, Sol Plaatje, Swartland and uMngeni.
Moody’s said it withdrew the ratings for its own business reasons, when it made the announcement last Friday. It said the ratings of the municipalities carried a negative outlook, which reflected systemic risk from South Africa’s sovereign ratings.
Asked whether the municipalities could still apply for loans, Efficient Group economist Merina Willemse said on Wednesday that anybody could apply for a loan, but the interest charged could be higher if a bank thought the risk was greater.
If a municipality had a bad credit rating, or no credit rating, it would mean the loan would be more expensive. In an open market system such as South Africa the risk factor and level of interest would be decided by the market.
Willemse said it was possible that, for bank loans, municipalities had the same risk factor as national government.
“I do not think that a municipality’s risk, or interest rate, would be very different than that of the country (national government),” Willemse said.
The credit ratings of the country and big parastatals such as Eskom would be more important to the market.
Moody's did not give further details on its decision. According to the company's website a rating could be withdrawn for reasons unrelated to creditworthiness. It could be due to a lack of essential data pertaining to the issue or issuer, among other reasons. The withdrawal may occur if new and material circumstances arise which preclude satisfactory analysis.