Water shortage to affect City’s finances
Moody’s report looks at implications of a Day Zero scenario
CAPE TOWN’S water crisis is set to have a range of economic and financial effects on the city this year. This is according to Daniel Mazibuko, a Moody’s associate lead analyst and author of the report, “City of Cape Town: Spending and borrowing set to increase as city battles water crisis, introduces new initiatives to bolster supply”.
The report, released yesterday, said the unprecedented water supply crisis in Cape Town would have a direct impact on the City’s operating and capital budgets in the 2018 fiscal year, and give rise to economic challenges whose severity would depend on how long the crisis lasted.
Mazibuko said Cape Town was in the unprecedented position of a major city facing the day when the municipal water supply would have to be turned off.
He said the City’s operating would be directly affected, because 10 percent of it was derived from water charges.
“If Day Zero is triggered and the supply is switched off in 2019, the operating and administrative costs of distributing emergency water supplies will place further pressure on the City’s budget, which is already expected to see a drop of 5% in operating revenues in the 2018 fiscal year.”
The report said the 2019 fiscal year would be challenging for the City if Day Zero occurred.
It added that all of the city’s economy would be affected by the crisis and that Cape Town was a major contributor to the country’s gross domestic product (GDP), generating nearly 10percent of the total in 2016.
The report said while a short-term crisis might not have a significant impact on tourism, the industry could face a significant decline if it extended to six months or longer and added that the city’s initial response to the crisis has been slow.
It said Cape Town would need to raise its capital and operating expenditure on water supply and water management and Moody’s estimates that capital expenditure related to water and sanitation infrastructure could be between R8 billion and R12.7bn over the next five years.
“The long-term solutions are likely to require significant capital and operating expenditure, and importantly, clarity on the governance of water supply in the city, the complexity of which has contributed to the slow response to the crisis,” Mazibuko added.
The Cape Argus reported yesterday that the City was auctioning off a beachfront property on Clifton’s Fourth Beach, with bids set to reach millions of rands, in order to help fund water projects.
The two-bedroom property was among the City’s properties being assessed for their viability.
The City had appointed ClareMart Auction Group in a bid to maximise its revenue from the sale of non-core properties, the report said.
According to Stuart Diamond, mayoral committee member for assets and facilities, the bungalow was being sold to generate much-needed cash.