Moody's downgrades Ekurhuleni and Tshwane

JOHANNESBURG - Two of Gauteng’s troubled metros have more problems, after global ratings agency, Moody’s gave a scathing assessment of their financials.

Moody’s downgraded Ekurhuleni by a notch and put Tshwane on notice for a further downgrade, meaning the junk status rating remains in place.

A statement released by the agency on Wednesday morning indicated that both cities failed to submit their audited financial statements to the Johannesburg Stock Exchange (JSE) within the 29 February deadline. 

Tshwane and Ekurhuleni are among the major centres plagued by the political chaos that has been associated with multi-party coalitions.

Municipalities have debt securities with the JSE, meaning they have to abide by the stock exchange’s debt listing requirements. 

The City of Ekurhuleni's non-investment grade was downgraded from Caa1 to Caa2 - which means Moody’s views it to be of poor financial standing and subject to very high credit risk. 

Meanwhile, the global ratings agency said Tshwane's Caa2 rating is still up for downgrade review.

The ratings agency said both municipalities have weak liquidity and poor budget management. 

It said the low likelihood of support from national government has only piled on the pressure, increasing the risk of higher debt.