Credit rating for Tshwane downgraded by a notch by Moody’s
Pretoria - Moodey's rating agency painted a bleak picture about the City of Tshwane’s low revenue collection and political uncertainty in downgrading the metro’s credit rating by one notch.
The agency announced on Wednesday that it had downgraded the City’s underlying baseline credit assessment by one notch as a long-term issuer, from Ba1 to Ba2, with a sustained negative outlook for the municipality.
While the news didn’t bode well for the future of the municipality, the City’s administrator responsible for finance, Rianda Kruger, suggested that all was not lost. She conceded it was “a bad thing” to be downgraded, but expressed hope that the municipality was still able to service its debts with creditors.
She said the administrators had made a provision to pay long-term loans and other liabilities, adding that the City was not in arrears with Rand Water.
“It is not nice to have downgrading. We are, however, very comfortable and positive that we will be able to service our debts. We have set aside money to pay the long-term loans and liabilities,” Kruger said.
Moody’s said the downgrade was due to the City’s weakened operating performance and liquidity and the negative effect of coronavirus on revenue collection.
The agency further indicated that the City recorded one of the lowest revenue collections rates for 2020 at 81.4%, while the average should be at 87%.
Kruger said: “Liquidity, obviously, because we don’t have as much cash in our collection. In the areas where they are struggling to get water we now have to get water delivered to them and the chemical toilets to other communities. We have to pay for that.”
Moody’s also cited the political uncertainty in the City as part of the problem, saying it believed this may contribute to the delayed approval of decisions that have an impact on municipal operations.
Kruger said there was nothing much the administrators could do about the political uncertainty.
“What we are here for is to make sure services are delivered and people get services that they paid for,” she said.
However, she said there had been interference (by) disgruntled service providers, who lost out on the waste management tender.
“In the last couple of weeks we have had a lot of vandalism and some of the service providers stopped the new guys from rendering service. It is definitely hampering service delivery because we need to find a way of improving service while we are fighting against people that want to stop the service,” Kruger said.
Reacting to the downgrade, the DA’s mayoral candidate Randall Williams said it happened as a result of the mismanagement of the municipality’s finances by the administrators.
Williams attributed the decrease in credit rating to “the ANC’s unlawful coup in the City and the imposition of incompetent ANC administrators who have mismanaged the City’s finances.
“At the end of 2019 the DA had built up the city’s cash and cash equivalents to R4.8billion. With the ANC having access to the City’s coffers, it now stands at R2.2bn,” he said.
However, Kruger said it was not true that administrators mismanaged the City’s finances.