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Moody's changes Cape Town municipal rating from negative to stable

Mar 18 2019 15:44

Ratings agency Moody's has changed its rating of the City of Cape Town municipality from negative to stable, the City of Cape Town said in a statement on Monday afternoon.

According to the City, it was due to its management of the drought crisis and its efforts to avert Day Zero.

It said the ratings agency also views the development of the City's Draft Water Strategy as favourable. The public participation period for comment on the strategy closed at the end of last week.

"The Moody's report affirms the City's Baa3/Aaa.za ratings, which are underpinned by Moody's view that the City administration will maintain its historically robust financial performances, as well as its conservative debt management," the City said.

"Good rating opinions are crucial for prudent financial planning as the better the rating, the lower the interest charged on debt."

Moody's also expects the City to maintain its liquidity profile in the next three years, despite the intention to fund 34% of its capital expenditure from its own funds. Debt levels will remain lower than its rated peers in the country, the Moody's report states.

Almost 50% of the City's R25bn capital expenditure plan will be invested in water and sanitation infrastructure, including ongoing water intervention strategies. These are intended to further insulate Cape Town from future shortages, according to the Moody's report.

According to the City's Mayoral Committee Member for Finance, Alderman Ian Neilson, this rating and analysis is great news for Cape Town, its residents, businesses and investors.

In his view, it shows that the City administration is moving in the right direction to enhance Cape Town's future resilience, while at the same time acknowledging that the City and its people overcame "one of the greatest crises in its history".

"It was able to do so because of the strong management of the metro, its level of professional skills and spirit of partnership that saved the day," said Neilson.

For the 2017/18 financial year, the City received its 15th unqualified audit opinion from the Auditor General. The City regards this as a notable feat for a South African municipality.

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