Doubts over Moody’s changing of City’s outlook to stable
ACTIVISTS and opposition parties are cautious about rating agency Moody's changing the City's outlook from negative to stable, considering backlogs in infrastructure and maintenance and questions whether the improved financial footing will benefit all in Cape Town.
Moody's Investors Service published its latest credit opinion reaffirming the existing long and short-term national and global scale rating of Aa3. za/P-1.za and Ba3/NP, and changed the City's outlook from negative to stable.
Moody's noted that its credit view “reflects its (the City's) large and diversified economic base, offset by its growing pressure to increase capital spending”. The City said: “The City's rating reflects its moderate financial performance supported by prudent financial management and its large and diversified economic base.
“The City's credit profile is constrained by capital spending pressure and the structurally weak national economic environment, worsened by the ongoing Covid-19 restrictions, which are expected to moderate the City's operating performance. The resilience in the City's cash position is expected to remain.”
Mayco member for Finance, Siseko Mbandezi, added: “Good rating opinions are crucial for prudent financial planning as the better the rating, the lower the interest charged on debt, which means it costs less to service debt and conserves public money.”
STOP CoCT's Sandra Dickson said what was on paper did not reflect reality as the City's future borrowing and ever rising tariffs were not taken into account.
“Moody's seems to now have taken a blind eye to CoCT's planned future borrowing as is evident in the current Draft Budget. Moody's is also overlooking the City's backlog in infrastructure and maintenance in the water department and sewage plants and the humongous costs it will generate over many years.
“With the above ignored, Moody's was coaxed by the City's complaints to change its views. This is alarming as South Africa's overall economic outlook has not improved one iota. If anything it has deteriorated.
“All looks well on paper while in real terms the City is faced with huge challenges with respect to housing, safety, infrastructure maintenance and pollution of its water bodies.”
GOOD councillor Anton Louw said was a good indicator when the rating of a city showed improvement.
“This encourages investment and showcases the city as a stable environment to do business.
“While this is welcomed, as GOOD we will monitor carefully if this indication of improved financial footing will indeed benefit all of the people of Cape Town – particularly those most vulnerable in society, which has not been the case hitherto.”