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Cape Town leaves South Africa behind with credit rating upgrade

Cape Town is leaving the rest of South Africa in its wake, following a credit rating upgrade from Moody’s. This upgrade by the agency’s investor services sees the City of Cape Town jump from ‘stable’ to ‘positive’, reports Business Live .

CAPE TOWN CREDIT RATING UPGRADE

City of Cape Town mayor Geordon Hill-Lewis out for a pedal. Image: File

The Western Cape is the only Democratic Alliance (DA) run province in South Africa following the 29 May elections. And while the Gauteng Cabinet is mired in Government of National Unity (GNU) indecision and infighting, a credit rating upgrade for the city has highlighting its continued progress in revenue collection and infrastructure improvement.

Cape Town is quite literally leaving the rest of South Africa behind, with a ‘Ba3’ long-term issuer and senior unsecured debt rating. This trumps South Africa’s sovereign rating of ‘Ba2’, which still languishes two notches below investment grade. The city’s proactive revenue collection and reduced expenditure has demonstrated strong governance and effective budget management, said the agency.

STRENGTH TO STRENGTH

Moody’s believes the City of Cape Town’s outlook is only set to improve in the next 18 months. Image: File

Moody’s went on to say, “The positive outlook reflects our view that Cape Town’s financial performance could strengthen further in the next 18 months, well surpassing baseline forecasts. In our view, the city’s progress in improving revenue collection should contribute to consolidating its financial performance and mitigate the reliance on debt for its substantial investment programme,” said the agency.

Geordin Hill-Lewis, City of Cape Town mayor, said he’s happy that Moody’s has not taken a blanket approach, assuming all local governments are in poor financial shape. “Our financial health and balance sheets are significantly stronger. And efforts to differentiate ourselves and demonstrate our solid financial standing appear to be paying off. This is an encouraging sign that our investments and hard work are yielding results,” said Hill-Lewis.

RAPID POPULATION GROWTH

The Western Cape is the most popular semi-gration destination in the country. Image: File

Following the no-majority 2024 election, Cape Town’s population continues to grow at a rapid rate as residents relocate from politically volatile areas like Gauteng and KwaZulu-Natal. Therefore, the city is turning to an aggressive infrastructure rollout. Top priority are water and sanitation, transportation, security, electricity, upgrading existing infrastructure and installing new infrastructure in poorer communities, said Hill-Lewis.

Moody’s also noted a track record of improved management policies and practices, which led the city to sound financial metrics. The city’s liquidity has helped maintain a moderate debt burden, despite a massive investment of R49 billion over five years.  

HAVE YOUR SAY

credit rating upgrade
Would you consider semi-grating to the Western Cape for its good governance and economic prospects? Image: File

What do you think of Cape Town’s credit rating upgrade? Is the Western Cape the best province in South Africa as credit rating agencies seem to think? Be sure to share your thoughts with our audience in the comments section below. And don’t forget to follow us @TheSANews on X and The South African on Facebook for the latest updates.  

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