Cape Town Sets the Standard for Good Governance in South Africa
The City of Cape Town has stood out as one of the first cities in South Africa to have taken several important measures to ensure good governance, creating a thriving environment for businesses and investors.
In yet another success story, the City of Cape Town was once again recognised by Moody’s for its sound fiscal position and prudent financial management in 2017. The Mother City maintained the highest possible level of credit quality within the national context, earning a long-term global sovereign credit rating of Baa2 and a short-term rating of Prime-2.
These ratings signify “investment grade” indicating a low risk of default for investors and those looking to do business in the city.
Moody’s based its decision on Cape Town’s impressive financial track record, including:
- Strong budgetary performance: The city consistently manages its budget effectively.
- Solid liquidity position: The city has readily available resources to meet obligations.
- Moderate debt levels: Borrowing is kept under control.
Additionally, the city has achieved an impressive 12th, consecutive unqualified audit report and third consecutive clean audit report in the 2015/16 financial year, making it one of the best cities to do business in South Africa.
Continuing its streak of successes, the City of Cape Town earned further recognition by Moody’s for its sound fiscal position and prudent financial management. The city’s credit profile, is currently rated at Aa3.za for long-term debt and P-1.ZA for short-term issuer rating, underscores its consistently robust operating and financial performance. Despite facing growing infrastructure spending pressures and navigating through a challenging economic landscape, Cape Town maintains low debt levels and a track record of improved management policies.
Investor confidence in Cape Town remains strong, with Moody’s reaffirming the city’s investment grade status.
Key points from Moody’s recent assessment include:
- Baseline credit assessment: Cape Town’s strong financial performance is highlighted by a gross operating balance of 9.2% in fiscal year 2022, driven by robust revenue collection and controlled operating expenditures.
- Financial management: The city maintains sturdy liquidity, with a cash ratio of 1x in fiscal 2022, and anticipates a gradual increase in long-term borrowing.
- Capital spending pressures: Despite rising infrastructure demands, Cape Town maintains positive cash financing surpluses, averaging 2% to 3% of total revenue during fiscal 2023-25.
These factors underscore Cape Town’s resilience in navigating economic challenges while sustaining fiscal prudence.
