Moody's Cape Town

An almost bone-dry Gamka dam shows the Western Cape has one hell of a fight on its hands

More Downgrade Panic: Moody’s hovers over Cape Town for #DayZero

Rating agency Moody’s has created some more panic over a possible downgrade for the City of Cape Town. What’s making Moody’s jittery? Well, the impending disaster of Day Zero isn’t helping…

Moody's Cape Town

An almost bone-dry Gamka dam shows the Western Cape has one hell of a fight on its hands

With Day Zero now 72 days away as of Monday, ratings agency Moody’s has delivered some even more worrying news. In an Investors Service report released on Monday, the agency revealed that the city’s marked income inequality together with the water crisis poses a potential threat to social order.

With the City of Cape Town currently being rated the lowest level of investment grade at Baa3, the persisting water crisis makes it a credit negative for Cape Town.

The report by Daniel Mazibuko, an associate analyst at the international agency, says that it remains to be seen how the City of Cape Town will cope as the water crisis’ potentially massive consequences unravel on its economy and general finances.

While the crisis is credit negative for Cape Town, the report emphasizes that this is just a research report, not a ratings action.

What the report did find, though: Cape Town’s municipal water revenue of R3.9bn equalled 10% of its overall operating income for last year.

According to the Moody’s report, the loss of revenue and added costs will hit the city hard.

“The City will lose a portion of this revenue and will have increased operational costs from crisis management policies and programmes, and implementation of water supply projects.”

A decline in the Cape’s tourism and agriculture industries can also be expected due to the crisis. Moody’s, therefore, recognises the potential danger of job losses and therefore a loss in tax income. Public health from poor sanitation was also picked up on.

The City of Cape Town currently has Day Zero listed for the 12th of April. The full list of the 200 water collection sites is also set to be released before the end of this week.

As of Thursday, residents are forced to reduce their daily per-person usage to just 50 litres. Once Day Zero hits,  they will have to make do with just using the 25 litres they manually collect.