FIFI PETERS: Rating agency Moody’s recently unleashed its hammer again, downgrading five municipalities, as well as the Ekurhuleni Water Care Company. Moody’s says it’s worried about the pressure these municipalities are experiencing on their finances. Many people may not even be paying rates and taxes owing to the pressures from Covid-19 and the weak economy.
We speak to one of those municipalities right now, the City of Johannesburg. We have Nthatisi Modingoane, the spokesperson of the city, joining the show. Nthatisi, thanks so much for your time. Moody’s is really worried about your finances. Does it have reason to be so worried, and do you agree with the latest downgrade?
NTHATISI MODINGOANE: Thank you very much. Fifi, for the opportunity. Let me start by clarifying that, from the city’s side. We are worried about the process that was followed when coming up with this rating, because what normally happens is that the agencies engage with the city, we give them the information, and then they come with a determination.
But this time around the ratings have happened without the city being engaged, and up to today the city has not been engaged. I think that what we feel is that some critical information has been ignored in terms of coming up with this rating. A blanket approach was used. Those different entities and municipalities were not looked into and assessed critically, because in terms of dynamics and approaches you can’t look at all municipalities without going into detail in terms of the plans, the programmes and what is happening in terms of the cash flow.
FIFI PETERS: So you think you were unfairly treated here?
NTHATISI MODINGOANE: What we are saying, is what we did; we even went to National Treasury and Moody’s themselves. The approach has not been done this way before. What they have said to us is that they are going to come back to the city to look at all the information that we have, so that they can make an in-depth assessment, which might look at reviewing the rating.
But what we are saying from the information that we have is that, had they considered that information, maybe the rating would have been different.
FIFI PETERS: So why do you think that they did things differently this time?
NTHATISI MODINGOANE: We are not sure yet, because they have not responded to the letter we sent to them at this stage. Just to give a sense of what normally happens, they would come and ask for information. And where the information is not audited yet, that disclaimer gets made to them so that they are able to make that assessment.
For example, in the City of Johannesburg, if you look at the year ending June 2020, our collection rates were about 86%, and at the end of the financial year, we had a cash surplus of about R5.5 billion in the bank.
And when we look at that and assess the measures that we have put in place because, you must remember, some of the drops would have been because of the hard lockdown, when the restrictions were reduced or amended, what happened is that we were now allowed to do things – your credit control measures and so forth.
And when we look at the performance of the municipality currently we are improving and seeing a very promising future.
Our collection rate is above 90% as we speak, and our cash reserves have increased by about 7% from the number that we had in 2020. So we are seeing progress.
There was a time during the hard lockdown where the collections were reducing a bit, by about 4% in terms of our target. But we are catching up since the restrictions have been [lifted].
FIFI PETERS: This ratings action from Moody’s, as I understand it, took place last week, towards the end of the week on Friday. You as the city responded to your investors who hold your bonds on the JSE yesterday. You say that you have written to Moody’s. When did you write to them about your query, and when are you expecting a response?
NTHATISI MODINGOANE: The letter from the city to them and National Treasury went out yesterday, and our anticipation is that they are considering it and we are hoping that they will come back to us and give us an indication of the way forward in terms of the process. The city is ready with the up-to-date information, so that we can furnish it to them and see how we can take the process forward.
FIFI PETERS: Not only did they downgrade the city alongside the other four municipalities, but they also signalled that further downgrades could come because your lenders might even be scared to give you more money down the line. So is this a possibility, or is this also a factor that you’re querying?
NTHATISI MODINGOANE: That’s what concerns us, because as an entity we have investors who are keen and looking at the performance of the city in terms of its commitment to service delivery and so forth. This kind of rating might send shivers down the spines of investors. So for us it’s a concern because we do share up-to-date information with our investors so that we try to assure them in terms of the liquidity of the institution.
FIFI PETERS: Okay. We really look forward to the development and hopefully we can have a catch-up a discussion with you when you get a response from Moody’s as to whether they will change or retract their latest statement.
But thanks so much for your time. We’ll leave it there. That was Nthatisi Modingoane, the spokesperson of the City of Johannesburg.