uMngeni denies rating downgrade

2013-09-03 00:00

HAS Moody’s rating agency downgraded uMngeni Municipality’s credit rating, or is it simply a matter of the municipality withdrawing from the service and not paying the fee to be credit rated this year?

The uMngeni Residents’ and Ratepayers’ Association (URA) insists that the municipality has been downgraded. Not so, says the municipality, explaining that it was never rated at all because it did not pay for the service this year. The Witness asked Moody’s to clarify the matter and received the following response from spokesperson Kirsten Knight in London. She said Moody’s had withdrawn the long-term national scale issuer ratings for 10 South African municipalities “for its own business reasons”.

The saga started when members of the URA read media reports that said “Moody’s pulls 10 town ratings” and “Moody’s snubs municipalities”. The story said that Moody’s had withdrawn the long-term national scale issuer ratings of 10 municipalities, including uMngeni. The media report said that all these municipalities had negative outlooks “inherited from South Africa’s negative sovereign rating outlook”.

However, it continued to say that Moody’s explained that when a rating was withdrawn, it might be for other reasons not related to the creditworthiness of the organisation being assessed.

The URA has waged a campaign against the municipality, which up until recently had closed its finance portfolio committee meetings to the public. For the URA, the media reports on Moody’s rating vindicated its stance. Jeff Paine wrote a hard-hitting letter to The Witness in which he said that the protests by URA had been endorsed by Moody’s downgrading of the municipality.

Paine wrote: “This view of Moody’s appears to be contrary to that of the municipality and the Democratic Alliance who, until recently, have been reporting to the residents of Howick on a turn-around with light appearing at the end of the tunnel.

“Does this not beg the question as to who are the experts and why is it that more professional people are not exposed to the information that is produced from the system?” Paine asked.

uMngeni municipal spokesperson Thando Mgaga said there was no cause for alarm. According to Mgaga, the municipality had engaged the services of Moody’s to provide a credit rating for the municipality a few years back when they applied for a loan through the Development Bank of Southern Africa (DBSA). When the municipality put cost cutting measures in place last year, it cancelled its subscription to Moody’s.

“This cost-saving exercise of ratepayers’ money was done in the 2011/2012 financial year, which means that in the 2012/2013 financial year the withdrawal of Moody’s services had already been effected,” Mgaga said.

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