The municipality, which was placed three notches deeper into junk territory is said by the rating agency to reflect a metro that is in a rapidly declining liquidity position. Last month, the cash-strapped municipality took its water board to court after Bloem Water threatened to impose water restrictions and supply the municipality with only 30% of its bulk water supply due to non-payment.

The rating agency said liquidity pressures in Mangaung reflect a combination of weak local governance and poor effectiveness of its recovery plan. Municipal spokesperson, Qondile Khedama, has since last week not responded to OFM News’ set of questions sent to him despite committing to release a statement on the matter. The DA in the province has meanwhile said Moody's downgrade was a warning that unless urgent steps were taken, the Metro will collapse.

The party last week held a media briefing where they announced they are looking at a legal action to remove the Executive Mayor, Olly Mlameli, as residents are forced to bear the brunt of maladministration and poor governance of the ANC administration under Mlamleli.

Following the High Court’s judgment on the municipality’s non-payment to its water board, the metro has until August the 17th to make a part payment on the debt otherwise residents in Bloemfontein, Thaba’Nchu and Botshabelo, amongst others, may have to brace themselves for reduced water supply.

The rating agency confirmed it had downgraded the long term rating of the municipality to B3 from Ba3 with a negative outlook that it will be able to fulfill its obligations. It is stated that at the end of June 2019, the metro was owed more than R4 billion, of which 36% was owed by business and government while 64% was owed from residents and other debtors.

Khedama is yet to clarify their plan of action regarding this and overall revenue collection measures.

OFM News