EDITORIAL: Slow poison of downgrades
The City of Johannesburg forced to approach the Development Bank of SA for funding as investor interest sours
Speaking on a panel at Wits Business School this week, Johannesburg’s the mayoral committee member for finance Rabelani Dagada revealed that the city, which has a debt book of about R17bn, had been hoping to raise about R2.5bn on the market after an investor road show late in 2016 but that there had been no appetite for it. In the end, the city approached the Development Bank of SA for the funding it needed, most of which was for investment in much-needed maintenance and repairs of existing infrastructure as well as in new infrastructure. The City of Johannesburg has not even been downgraded yet: it is rated only by Moody’s, as are some of SA’s other large metros. Moody’s has all of them on review for a downgrade, with the sovereign. Meanwhile, though, even the expectation of a downgrade has damped the appetite of bond market investors and other lenders for municipal debt — and no doubt raised the cost of that debt. It is a story that is playing out across the market, following the ...
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