FINANCE: Moody's Shows Confidence In Cape Town
Recent Western Cape Business News
Despite the recent volatile economic climate, the City of Cape Town has managed to retain its double-A credit-rating for the fourth consecutive year.
Independent ratings agency, Moody’s International, has again confirmed Cape Town’s Aa2.za rating with stable outlook in its annual rating review. Mayoral Committee Member for Finance, Alderman Ian Neilson, says that this is a significant achievement. “This prized rating provides investors and the community with confidence in the financial leadership and management of this municipality,” he says. A strong rating allows for a lower interest rate from banks and other financial institutions, which places the City in a stronger financial position.
The City of Cape Town is rated as the highest of the five metropolitan municipalities rated by Moody’s in South Africa, whose ratings span from Aa2.za to Aa3.za. It compares favourably with the other large metros in South Africa in terms of both budgetary performance and management.
Moody’s report describes Cape Town’s financial outlook as ‘stable’, reflecting the expectation that its key financial ratios will remain sound in the medium-term. Cape Town’s revenue has displayed consistent overall steady growth over the past few years, reflecting an increase in property tax rates and service charges (notably electricity and water tariffs) as well as transfers from the national government to finance capital projects for the 2010 FIFA World Cup™.
The report further confirms that the City of Cape Town is in a comfortable liquidity position and is experiencing buoyant budgetary performance. In addition, Cape Town’s external debt levels are in line with other large metros and even though these are set to rapidly increase due to an aggressive capital investment programme, they remain within accepted levels. The report further notes that Cape Town’s key financial metrics and budgetary position are expected to remain sound in the medium-term, supported by a prudent financial policy and a relatively robust economic base.
Moody’s lead analyst for Cape Town and author of the report, Francesco Soldi, says that the City’s growth in borrowing is not cause for concern. “Moody’s regards Cape Town’s borrowing plans as ambitious and will closely monitor its debt sustainability in light of prospective revenue growth and liquidity position, but the City’s prudent financial management approach provides comfort that any increase in financial leverage will be commensurate with its budget,” he said.
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