All SA cities painted with same junk brush, Cape Town Dep Mayor disputes rating

A Moody’s Investors Service report downgraded five South African cities, placing them into junk territory. Among them is Cape Town, a city that, last month, received feedback from Moody’s saying that the city is in a “strong position.” Joining BizNews is Ian Neilson, the Deputy Mayor of the Mother City. “We’re able to deliver on our budget and on our plans. We don’t see any merit in this downgrade,” he says. – Jarryd Neves

Cape Town Deputy Mayor Ian Neilson on the Moody’s rating bestowed upon Cape Town:

We’re not actively trying to differentiate ourselves in the sense of wanting to be different. But we are different, if I can put it that way. If we look at our performance, financially, it is completely different to other municipalities. We’ve been a bit surprised by this downgrade at the weekend by Moody’s. Just a month ago that they gave us a credit rating where they confirmed our previous rating and said we were in a strong position. This time it seems they’ve just decided to go countrywide and downgrade all the metros on the same, broad basis that there’s been a drop in collection rates across the country during the Covid period.

They say around 10%. But that’s simply not our experience. We have, in fact, increased our collection rate in the past year. We were previously sitting around 95% collection. We are now sitting at over 98% collection. We are sitting with significant funds in the bank. In our view, our finances are in a very strong position. Our budget is strong. We’re able to to deliver on our budget and on on our plans and we don’t see that there’s any merit in this downgrade.

On the differences in rating between Cape Town and other SA metro’s:

It seems that Cape Town [and] Johannesburg are on one level. We have essentially been capped by the national rating. We find that the way that the rating agencies go around rating us, is they weight it 60%, based on what the national position is. If the national position is poor, they will not rate us any higher than that. Perhaps [that is] understandable, because they see that national is the last resort – although in practice we’ve never seen the national government as the last resort for Cape Town’s finances. Other municipalities are very much lower.

On why the rating is relevant if Cape Town doesn’t borrow:

There is a sense that we need to, on a constant basis, have ourselves rated. There’s [an] expectation from national government that all metros do it – that you do have a second opinion, as it were, compared to what you get from the auditor general or other state functions for example. That you get the independent view on that matter.

It is not the only rating we get. There’s an organisation [called] Ratings Afrika, which does a different type of rating. It’s not based towards borrowings, but looks far more broadly at the financial positions of the city. We found that to be far more useful, in terms of understanding our position and how we are performing.

On why Cape Town’s finances are in great shape compared to cities in the rest of the country:

It’s good governance. That is what it comes down to in the end. We have applied consistently good governance over the past 15 years, since the DA took over management of the city. In that period, we have ensured that every year, the finances are well managed. That we do good billing. We collect the money. We ensure that on our expenditure side, we keep it within the budget limits. In fact, we drive savings where we can. In fact, that’s why many years we end up with a surplus – even though we actually budgeted for a balanced budget.

All of this puts us in a position to have a strong balance sheet, cash in the bank. If you look at our property rates, for example, we have the lowest cent in the rand of all the metros in the country. We’re sitting at about 0.6 cents in the rand for residential properties. The next metro is Johannesburg with 0.8 cents and all the others sitting above 1 cent in the rand. It’s even more dramatic as far as commercial rates are concerned. We sit with the commercial rate of 1.2 cents in the rand. Johannesburg and others are 2 cents and above. It is significantly different and it’s because we have strong and good governance, good financial management and we do that consistently – and have done so over a period of time.

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