Mashaba announces Joburg under ratings review

 

President Zuma’s recklessness places Joburg’s credit rating at risk of downgrade.

This according to City of Johannesburg Mayor, Herman Mashaba following MMC of Finance Dr Rabelani Dagada’s views that the City will not achieve a 5 per cent annual growth before 2021 after the junk status downgrade.

The City’s global scale short-term rating is currently at Prime-2 and the long-term rating currently at Baa2.

But this has now been placed under review for downgrade.

The decision to place, not only the City but a number of large metros across the country, under review, is a consequence of the gross disregard exhibited by President Jacob Zuma in instituting an abrupt reshuffle of cabinet adversely affecting key government institutions, Mashaba said.

The mayor said ratings agencies’ reasoning behind this review is because of the close operational and financial linkages between national government and municipalities ‘illustrating the centralised nature of the local public sector’.

Mashaba said the reshuffle and subsequent economic blow will threaten service delivery and job creation in Joburg.

Reflecting on what Dagada told Randburg Sun earlier this week, Mashaba said a downgrade in the City’s rating will strangle efforts to reach the 5 per cent economic growth target needed to stimulate job creation and improve service delivery to residents.

“In addition, 34 per cent 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,” explained Mashaba.

“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.”

Mashaba said this is disappointing, especially because Moody’s upgraded both the global and national scale ratings of the City by four notches in March last year.

“As a City, we will continue to monitor developments and do all we can to retain investors’ confidence in the City,” the mayor said.

The City, Dagada said, has always had a bigger economic growth than Gauteng province and the country, but if revenue declines, the possibility of initiating capital projects like building infrastructure declines along with it.

“I have seen that when the City spends more on capital projects, it tends to far exceed the national and provincial economic growth. But now, this might not happen,” he said.

Related articles:

Downgrade slashes Joburg’s economic growth plans

How bad is the downgrade, really?

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