Sound Financial Management Earns City Higher Credit Ratings

The City of Cape Town's improved debt collection programme, sound liquidity and hands-on management has earned the City an upgraded credit rating.

The first independent credit rating was done in October 2005 by CA Ratings of Johannesburg. Cape Town then scored a long term A+ and short term A1 grade. The latest evaluation review during the last quarter of 2006, indicates an AA- long term and A1+ short term score with a stable outlook.

The survey aimed at establishing the City of Cape Town's financial viability in terms of its long-term and short term credit ratings. It touches on the City's financial strategy, management systems and financial profile in terms of revenue, expenditure, and debt management.

"These ratings indicate a very strong capacity to repay long term liabilities, and an extremely strong capacity to repay short term obligations,'' says Cllr Ian Neilson, Mayoral Committee for Finance.

"We face major challenges and high capital expenditure is needed to eradicate infrastructure backlogs and unemployment to improve our residents' quality of life. This upgrade will be very beneficial in attracting investment and in facilitating borrowing at competitive rates to achieve these goals."

According to a report by CA Ratings, the company has raised the City's grading based on its low debt burden which they expect to remain modest over the medium term. The recently improved debt collection rate and sound liquidity as well as the experienced hands-on management at top level also contributed to the improved rating.

The report also states that Cape Town plans to spend R6,7 billion over the next three years in capital projects which will be financed by R2,4 in grants, R3,1bn in borrowings and R1,2bn in revenue. The City's interest bearing debt is expected to peak at some R4bn in 2009 and should remain manageable with a 30% between debt and revenue.

This ratio is considered low compared with most other metros which are expected to have higher debt levels.

Issued by:

Communication and Markerting
City of Cape Town
Tel: 021 400 2201

Media Queries:

Technical:
Lodi Venter
Director: Treasury
Tel: 021 400 3636
Email: lodi.venter@capetown.gov.za

General Queries:

Cllr Ian Neilson
Mayoral Committee Member for Finance Tel: 021 400 1306
Cell: 083 306 6730