Ratings agency Moody's International has noted that Cape Town's “Aa2.za/P-1.za” national scale issuer and debt ratings reflect its strong budgetary performance and good liquidity position, underpinned by a large and diversified economic base, coupled with historical strong financial governance.
In its annual credit report on the City of Cape Town, Moody's provided a rating outlook of “stable”.
“Consistent fiscal discipline and expenditure rationalisation has ensured regular cash flows and maintenance of strong cash reserves in 2010,” said Kenneth Morare, Moody's lead analyst for the City of Cape Town and co-author of the report.
“The ratings on the City of Cape Town also reflect moderate debt levels, which are, however, expected to increase due to the city's sizeable capital expenditure programme in the medium-term,” added Morare.
According to the ratings group, Cape Town's indebtedness was projected to amount to 5.548 billion (US$793 million) or 29% of operating revenue for the financial year ending June 30 - a negligible decrease on debt levels of 2010. “Strong cash flows enabled the city to self-finance capital investments in 2010,” it said.
Moody's noted that Cape Town was the second-largest city in SA, with total revenue of 18.7 billion (US$2.7 billion) for 2010. The city had a population of 3.5 million, which accounted for 70% of the Western Cape Province and 7% of SA. Cape Town's unemployment level was estimated at about 23.5%.
Moody's stressed that the rating agency's report was an update to the markets and did not constitute a rating action. - I-Net Bridge