Minimal impact on agriculture is expected in four of Mzansi’s metropolitan municipalities that were recently downgraded to junk status by Moody’s. However, concerns are rising over how fresh produce markets under the domain of these metros will be impacted in the long run.
In its latest report, credit ratings agency Moody’s downgraded the City of Ekurhuleni, the City of Cape Town, the Nelson Mandela Metropolitan Municipality and the City of Johannesburg to junk status.
Moody’s said this reflect rising liquidity pressure as a result of material shortfalls in revenue collection in the context of very weak growth.
Furthermore, Moody’s warned that is uncertain about the capacity of these municipalities to secure financing well in advance for debt and other payments due.
According to the Agbiz chief executive, Dr John Purchase, the impact of the Moody’s downgrade on agriculture in these metros would be small.
This is because most metros generally do very little agricultural development work as it falls more on the to-do list of provincial and national governments.
‘Reposition fresh produce markets’
However, Purchase admitted that any impact, however small it may be, will definitely be on the negative side.
“What we would like to see from an agriculture market perspective, though, is that fresh produce markets move out under the domain of the metros and are established as public-private partnerships with their own boards and management structures,” Purchase told Food For Mzansi.
Besides the Moody’s downgrade, the country’s metros have badly neglected the fresh produce markets for far too long, added Purchase.
There has been very little investment in these so-called “cash cows”; a great cause of concern as all farmers – big and small – should benefit from a properly run platform for market access.
“A downgrade generally means you will need to raise capital, or borrow, at a higher rate which leaves you with less capital to deploy,” explained Purchase.
This therefore pointed to even less capital being made available to invest in fresh produce markets.