Image: iStock
GCR Ratings Agency has given the Joburg metro a negative credit rating, downgrading the “world-class African city” from its previously satisfactory “stable” outlook.
The credit rating agency said in a media statement that the city’s negative outlook reflects ongoing pressures on operating performance evidenced by low income growth, increasing expenditures and “relatively weak” collection rates.
ALSO READ: SA credit rating outlook dims
According to GCR Ratings, the Joburg metro’s performance has “worsened” over the past financial year, “on the back of persistent service delivery backlogs, load shedding and political dysfunction”.
Independent Professor Bonke Dumisa told The Citizen he’s “not surprised” by the negative rating.
“It’s no secret that our metros, especially in Gauteng and eThekwini are struggling to survive due to a culture of non-payment [by ratepayers],” Dumisa said.
While GCR Ratings attributed non-payment to “affordability pressures” amid rising inflation and interest rates saying collection rate fell from 90% in 2021 to 87.7% in 2022, Dumisa begged to differ.
The economist said failure of ratepayers to make payment is not always due to non-affordability, but “a sense of entitlement.”
Referring to a period when Tshwane Metro faced low collection issues, Dumisa said Tshwane Municipality’s “tough” collection approach revealed that it’s not always about money, or lack thereof.
“Some of the biggest hotels and institutions were among the list of ratepayers owing the municipality,” Dumisa said.
ALSO READ: ‘We’ll have no city to run’: Speaker warns City of Joburg could be placed under admnistration
When it comes to non-payment as a form or protest against corruption, Dumisa said ratepayers shouldn’t use corruption and poor service delivery as an excuse.
“If you want to complain about [poor] service delivery, then prove that you’re paying,” said Dumisa.
“Corruption is a factor, but it shouldn’t be an excuse,” he added.
Are credit ratings really that important? Dumisa said yes.
“If you’re in ‘junk’ status, investors won’t touch you – not even with a stick,” he said.
The expert said a negative credit rating reduces investor confidence, signifying a higher potential to default on loans.
“If [investors] decide to do business with you, they’re most likely to charge higher interest rates,” he said.
When it comes to “world-class” Jozi, Dumisa said as the largest GDP- contributing metro, making up for 20% nationally and 40% provincially – the municipality “might get [some] leniency compared to [metros like] Buffalo City, for example,” Dumisa said.
Dumisa said non-payment means the municipality can’t raise its own funds to provide quality services for residents and businesses, having to rely primarily on the national fiscus.
ALSO READ: Mashatile bad for Joburg and SA, finish and klaar
Warning against a reduced municipal budget, Dumisa said low funds could worsen service delivery levels, and cause the municipality to increase rates to make up the deficit.
“Those who don’t pay…will worsen service delivery levels,” Dumisa concluded.
Meanwhile GCR Ratings also said the City’s rating could still be further downgraded if its operating performance doesn’t meaningfully improve.
The Citizen reached out to City of Joburg for comment, and is still awaiting a response.
Download our app and read this and other great stories on the move. Available for Android and iOS.
