Standard and Poor’s (S&P) Global Ratings downgraded the credit ratings for Eskom, Transnet, Umgeni and Rand Water yesterday.
Umgeni Water, Rand Water and Transnet were all lowered to “zaAA-” from “zaAAA”, while Eskom was downgraded to “zaBB-“ from “zaBB+”. All were listed as holding a negative outlook.
The decision followed the downgrade of South Africa’s credit rating earlier this week following president Jacob Zuma’s cabinet reshuffle.
According to statements from the international credit company, the lowered ratings reflect their view that as all four bodies are dependent and highly supported by government financially, they are not insulated from the country’s creditworthiness and can therefore not be rated higher than the country.
“We believe that the downgrade of the sovereign signals a weakening of the government’s ability to provide support if needed,” said an S&P spokesperson.
S&P noted that ratings on Eskom factored in the continuing substantial gap between the power parastatal’s stand-alone credit profile and its global scale rating. Uncertainty over whether government would be willing to provide additional support to Eskom over the course of the ongoing court case between Eskom and the National Energy Regulator of South Africa (Nersa) has contributed to increased financial pressure on the organisation.
S&P went on to explain however that its assessment of Transnet’s financial risk profile was limited by the company’s large capital expenditure (capex) programme and it would monitor whether the “currently fluid political environment” could result in any changes to government relations with the infrastructure provider.
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