City of Cape Town rating outlook changed to stable

21 Apr 2022 in Where We Govern

The ratings agency Moody’s has changed its outlook of the City of Cape Town municipality from negative to stable.

Moody’s Investors Service published its latest credit opinion reaffirming the existing long and short-term national and global scale rating of and Ba3/NP, and changed the City’s outlook from negative to stable. This update follows after the City received its 17th consecutive unqualified audit report and after the change in outlook of the sovereign (the Republic of South Africa) from negative to stable.

The City’s rating reflects its moderate financial performance supported by prudent financial management and its large and diversified economic base. The City has consistently generated a robust operating surplus with stronger liquidity and lower debt than that of its peers in South Africa also rated by Moody’s.

The City’s credit profile is constrained by capital spending pressure and the structurally weak national economic environment, worsened by the ongoing Covid-19 restrictions, which is expected to moderate the City’s operating performance. The resilience in the City’s cash position is expected to remain. The City’s low debt level, together with its liquidity reserves, places the City in a favourable position to raise funding. Any movement in the South African sovereign rating will impact directly on the City’s global scale rating.

‘The City is pleased with this change in outlook from negative to stable. Good rating opinions are crucial for prudent financial planning as the better the rating, the lower the interest charged on debt, which means it costs less to service debt and conserves public money. Although economic pressure is pronounced and the post Covid-19 disaster recovery has been much slower than anticipated, there is room for hope and optimism. In Cape Town, we are doing all we can to enhance resilience going forward and ensure we remain financially healthy enough to provide services,’ said the City’s Mayoral Committee Member for Finance, Councillor Siseko Mbandezi.