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

5 April 2017

I am deeply concerned by the report of credit rating agency, Moody's Investors Services, placing City of Johannesburg’s global scale short-term rating currently at Prime-2 and the long-term rating currently at Baa2 under review for downgrade. 

The decision to place not only the City of Johannesburg, 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.

Indeed, reasoning given by the rating agency states that:

“The decision to place the ratings of 10 regional and local governments and three government-related issuers on review for downgrade reflects the close operational and financial linkages between the national government and municipalities, illustrating the centralised nature of the local public sector.”

The irresponsible and self-serving cabinet reshuffle by President Zuma has thrown the economy and our sphere of government into a potentially downward tailspin which will threaten service delivery and job creation in our City. Let us not be fooled, it is our poorest residents who will suffer the most as a result of these developments.

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.

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.

What is most disappointing is that the President’s latest irresponsible conduct comes after 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.

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

Issued by Luyanda Mfeka, Media Specialist, Officer of th Executive Mayor, City of Joburg, 5 April 2017