Ratings downgrade will be negative for metros - Van Rooyen

2017-04-05 15:26
David van Rooyen (File)

David van Rooyen (File)

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It is a setback but we have no reason to be despondent - Gigaba on ratings downgrade

2017-04-04 13:48

In his briefing following his meeting with Pravin Gordhan, newly-appointed Finance Minister Malusi Gigaba revealed that the government was already aware of S&P's decision to downgrade South Africa to junk status on Friday.WATCH

Cape Town – Co-operative Governance and Traditional Affairs Minister David van Rooyen says metros will not escape financial hurt if the country's credit ratings are downgraded.

Van Rooyen was addressing the media on Wednesday at the launch of the third Presidential Local Government Summit, to be opened by President Jacob Zuma on Thursday.

During a round of questions, Van Rooyen admitted that credit reviews on some of the country's metros by ratings agencies would affect their functioning.

"Ratings are important for those institutions trapped in the trend of borrowing money," Van Rooyen said in answer to a News24 question.

"The bulk of our municipalities are funded nationally, and those like cities which have provisions to borrow, if they are rated negatively, that will of course affect their standings in the market.

"Any downgrading will be regrettable."

Effects of Zuma's negligence

However, Van Rooyen said that municipalities were better positioned – at least in the short-term – as their medium-term budgets had already been approved.

DA MP Kevin Mileham on Wednesday said the party was deeply concerned about the effect a downgrade could have on municipalities.

He said that Moody's placing the cities of Johannesburg, Ekurhuleni and Cape Town on review this week showed the effects of Zuma's "negligence" and would be felt in service delivery.

"Downgrades, through no fault of the local governments themselves, would mean that the cost of servicing debt will rise, and this will take funds from service delivery and job creation," Mileham said.

He said it would be harder for local governments to attract investment at a time "when it is sorely needed".

Read more on:    david van rooyen  |  cape town  |  ratings downgrade  |  junk status

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