South Africa at risk of credit downgrade due to Cape Town drought: report

Cape Town’s impending Day Zero is likely to have a severe knock-on effect across the entire national economy, widely affecting a number of sectors, and resulting in a possible credit rating downgrade for South Africa.
Speaking to the Citizen on Tuesday, economist Mike Schussler said that the water crisis is several times worse than load shedding, as not having access to water is relatively permanent compared to rolling blackouts.
This could lead to a number of businesses and industries looking at semigrating so that they can continue business operations in the country, he said.
Depending on how long the drought lasts, he believes that major industries such as IT, transport, agriculture as well as exports will all be significantly impacted as water scarcity limits businesses and causes Capetonians to look for greener pastures.
A water crisis to me is a few times worse.
The ratings agencies look at the overall growth of the country and the population growth.The impact is probably a downgrade.
“This makes the cost of capital more expensive.
Cape Town credit negative The water crisis afflicting Africa’s top tourist destination is credit-negative as it will reduce revenue at a time when the city has to boost spending to ensure supplies, Moody’s Investors Service said in a report on Monday.
The report doesn’t constitute a rating action, said Moody’s, which has an investment-level rating on Cape Town’s bonds.
“Other effects include threats to public health from poor sanitation and, more generally, to social order, which is significant given Cape Town’s marked income inequality,” Mazibuko wrote.

Learn More