The City of Cape Town has received a favourable interest rate for the R2.38 billion credit facility agreement it recently signed with French development bank L’Agence Française de Développement (AFD).
The loan was drawn down during the first half of March 2013 and will assist the City in financing infrastructure projects identified in the Integrated Development Plan (IDP).
The loan is repayable over the next 15 years. The average rate for the loan is a favourable 5.7619%, which is lower than the South African market rate and is close to the current SA inflation rate. This low rate was made possible by the City’s reputation for sound financial management.
This interest rate is fixed and the amount is denominated in Rands, meaning the City does not have any foreign currency risk exposure on this loan.
“As an administration, we are always cognisant of the fact that we are dealing with public money. As such, we have to manage our finances as prudently as possible, and with as broad a vision as possible. With this rate in place our residents can rest assured that they are getting more ‘bang for their buck’,” said Alderman Ian Neilson, Executive Deputy Mayor and Mayoral Committee Member for Finance.
The loan agreement was signed by the City Manager and AFD officials on 18 February 2013, after two years of negotiations.
Cape Town Executive Mayor, Alderman Patricia de Lille, explained that the city is grappling with limited resources in meeting the demands of rapid urbanisation and addressing the longstanding legacy of Apartheid spatial planning. Even though the City invests a large portion of its capital budget on building new infrastructure and maintaining existing infrastructure, “…the reality is that our own sources of revenue are not enough to meet the service delivery expectations of all residents. This is why we seek additional funding from external sources that share our vision to be the leader in municipal service provision in the country”.
The money from the loan will fund a portion of the City’s capital budget for the next two years. This will include financing infrastructure projects such as the expansion of the MyCiTi bus services to Mitchells Plain and Khayelitsha, the expansion of the electricity, water and sanitation systems, and the construction of community facilities such as clinics, parks, and libraries in previously disadvantaged communities.
“The loan enables the City to accelerate service delivery and continue to be the leader in service delivery across South Africa,” said Alderman Neilson.
