Moody's: Tariff concerns for South Africa municipalities

Moody's Investors Service said the latest electricity tariff increases announced in South Africa will likely add to the liquidity pressures on the country's municipalities, as they purchase electricity from national utility Eskom and sell it on to consumers.

While Moody's said it does not envisage any immediate rating implications for the 24 municipalities it rates, downward pressure may occur for those issuers that fail to maintain solid revenue collections from customers and manage the increased expenditure pressure.

The new tariff regime will impact South African municipalities directly, the agency said, as they will need to increase expenditures for electricity purchases and pass on the higher costs to consumers, which will create revenue collection difficulties.

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