Municipal financial stability ratings

Cape Town improves its score

Deputy Mayor of the City of Cape Town, Ian Neilson
Ian Neilson

Ratings Afrika, which specialises in ratings and similar opinions gauging the soundness of governance in various categories, has released its most recent "municipal financial stability ratings index" for the City of Cape Town.

Executive Deputy Mayor of the City of Cape Town, Ian Neilson says in terms of the overall index, city council moved up from 50 in 2008 to 60 points in 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,” Neilson said.

"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," says Neilson.

The detailed report includes the following sub-categories:

  • financial position
  • operating performance
  • liabilities management
  • liquidity management

In all sub-categories, 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.

Ratings Afrika Municipal Financial Stability Ratings Index (Cape Town) 

 

2008

2009

2010

2011

20

Overall index score

50

51

54

59

60

financial position

56

58

55

57

64

operating performance

44

39

47

52

53

liabilities management

69

65

54

63

66

liquidity management

38

45

57

60

58

 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 this year.

The city was able to deliver its operating and capital budget this year without having to borrow money. 

Operating performance

In this category the city has improved from 44 in 2008 to 53 this year.

During this financial year, we have 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 this year.

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. This year 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.  

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