Metro likely to avoid downgrade
Harper lauds improvement in municipality’s financial management
THE Nelson Mandela Bay Municipality is not exempt from the gloomy economic outlook of the country as ratings agency Moody’s places the city under review for a downgrade.
For the 2014-15 financial year, the municipality received one of the best municipal ratings from Moody’s – the same as the Cape Town and Tshwane metros.
While Moody’s is placing the city under review for a downgrade, Bay chief financial officer Trevor Harper said a downward slip seemed unlikely as the city had made improvements in its financial management.
“Our cash position has improved, with us now sitting at close to R2-billion in our account,” he said.
“Our personal financial rating has also been positive, with improvements all round as our audit outcomes have also improved and we expect another unqualified audit.
“In my view, it would be difficult to downgrade us with all these. We could see a downgrade if the country gets a sovereign downgrade.”
A downgrade would see future borrowings either impossible or coming with higher interest rates, which economist Derek Zimmerman said could affect service delivery.
Last year, the rating agency affirmed the city’s credit rating to A1.za, changing its outlook from negative to stable.
South Africa is under review by Moody’s for a downgrade – which would bring it closer to junk status – with the rating agency’s representatives in the country to see if the government can buck the downward slip of the economy.
Zimmerman said: “The implications of a ratings downgrade are quite severe.
“[It] would very well filter down to the ratepayers because the city’s revenue pool will remain the same, but with the higher credit cost, more money would need to come from them to maintain the same level of service delivery.”