Cape Town’s reputation as a “beacon of hope” for good governance has been destroyed by the DA, when the City was downgraded to junk status by credit rating agency Moody's, opposition parties said.
The ANC said the DA's “beacon of hope” in Cape Town had been destroyed through maladministration, underspending on uplifting the poor and services for them, and over recovery on drought penalties and loans.
This, as City said they have written to Moody’s to clarify the outcome of what they term as a “conflicting” report, after it was named among the municipalities downgraded to junk status on Friday.
The City was downgraded, along with the City of Ekurhuleni, the Nelson Mandela Metropolitan Municipality, and the City of Johannesburg – with Moody’s citing uncertainty in the strength of their revenue collection and increasing financial pressures.
ANC Western Cape legislature acting local government spokesperson Pat Marran said: “This is a major blow for the DA, as two more so-called model DA-metro councils were also junked on Friday.
"The DA is on the defensive path of smoke, mirrors, spin and lies, trying to shed more rays of positive light on the DA. It wrote to ask more info from Moody's. But, the truth remains: The DA is bad for Cape Town. The DA spews out contradictions which confuses residents.”
Deputy mayor Ian Neilson said in the City’s credit rating opinion issued last month, Moody’s acknowledged that the City consistently reflects “prudent and strong” financial performance, with a stronger liquidity position, and also acknowledged that the City’s overall financial performance also remains stronger than that of its rated peers in South Africa.
Neilson said the City’s cash position also remains positive to meet its ongoing creditor's obligation and other future obligations, such as bond repayments. In addition, the City’s cash liquidity is sufficient to continue the roll out of the City’s 2021/22 capital programme. The working capital is currently equal to about one and nine months of expenditure.
’’The national Treasury guidelines are that municipalities should have working capital of between one and three months of expenditure, which is within this norm and considered appropriate at this time,” he said.
Sandra Dickson of Stop CoCT said the City seemed to have “fallen victim” to its own conflicting messages that it sends out.
Dickson said the credit rating opinion by Moody’s, on June 10, states that the City borrowed R1.1 billion in the 2020 financial year, adding that the report further states the City plans to borrow R2.5bn in fiscal 2022, and a further R4.5bn in fiscal 2023.
“As a result, the City's net direct debt will increase to R8.9 billion by fiscal 2023, with net direct and indirect debt as a percentage of operating revenue rising to 18%. This probably set off alarm bells with Moody's, as the CoCT is providing to borrow – but no clear reason for it is given,’’ said Dickson.
’’It appears that Moody's is seeing what STOP CoCT sees. The poor economic growth against the background of instability in the country, and the increases in tariffs each year, is seriously putting the City's financials at risk,” she said.
Good party secretary-general Brett Herron said the downgrade was disappointing, but not surprising.
“The downgrade is a direct result of poor leadership and leadership in conflict among themselves, and with their administration and its management. These are the outcomes of poor leadership and the DA must take responsibility for allowing their flagship government to become dysfunctional,” Herron said.
Cape Times