Ratings Afrika, which specialises in ratings and similar opinions gauging the soundness of governance in various categories, has released their most recent Municipal Financial Stability Ratings Index for the City of Cape Town.
In terms of the overall index, the City moved up from 50 to 60 points from 2008 to 2012 and, together with one other city, has the highest index of the metros. According to the report, “based on the historical performance, Cape Town is likely to maintain this level of stability over the medium-term.”
The findings of this index are further evidence of the City of Cape Town’s commitment to building a Well-run City which practises exceptional financial management in order to deliver services to all of our residents. It demonstrates that this municipality provides the gold standard for fiscal probity in South Africa.
The detailed report includes the following sub-categories:
- Financial Position
- Operating Performance
- Liabilities Management
- Liquidity Management
In all subcategories, the City now has a score above 50 points. Its most dramatic improvement has been in terms of liquidity management, where the score has improved from 38 to 58 over four years.
The Ratings Afrika Municipal Financial Stability Ratings Index for the City of Cape Town reads as follows:
Financial Stability Index
Financial Position
Since 2008, the City of Cape Town has moved from a score of 56 to 64 in 2012. This reflects the fact that we have raised our capital investment to R4,3 billion in 2012. The City was able to deliver its operating and capital budget in 2012 without having to borrow money.
Operating Performance
In this category the City has improved from 44 in 2008 to 53 currently. During the 2012 municipal financial year, we spent more than 97% of our operational budget. In doing so, we have increased our maintenance spending and are able to ensure that residents of Cape Town enjoy a city with better roads, working street and traffic lights, reliable supplies of water and electricity, and regular collection of refuse.
Liabilities Management
The City, in this category, went from a high 69 in 2008 to 66 in 2012. Even though this is a downgrade, according to the Ratings Afrika report, “the liabilities management of Cape Town is good given the challenges and the size of the city. The liabilities to revenue ratio of 36% is acceptable for a metro with a diversified economic base which leaves some room for borrowing should it be necessary.”
Liquidity Management
In 2008, the City of Cape Town scored 38 points in this category. In 2012, we scored 58. Liquidity Management deals with the cash flow management of the City. The high score reflects the unprecedented revenue collection rate of this administration and that there are sufficient cash resources to service short-term obligations including the prepayment of loans.
Alderman Ian Neilson
