City's 2010 financial report shows positive financial growth
The City of Cape Town has submitted its 2009/2010 financial statements to the Auditor-General (AG). The AG's report on these statements will be submitted to Council in January 2011.
"Despite a worldwide economic recession and local downturn, the report shows positive growth and a sound financial position and I am very pleased with our progress. We have emerged on the other side of the 2010 FIFA World CupTM with improved capital investments and a strong cash position," said the City's Executive Deputy Mayor and Mayoral Committee Member for Finance, Alderman Ian Neilson.
The highlights in the financial report include:
· The City's total property, plant and equipment holdings increased by 21.95% to R20.1 billion. This includes capital expenditure of R4.7 billion. Over R1.5 billion has been spent on cash-generating infrastructure assets, including R667 million on Electricity; R577 million on Water and Sanitation; and R285 million on Waste Management.
These investments are in line with the City's long-term goal of infrastructure-led growth, which is conducive to investment in Cape Town.
· The amount spent on repairs and maintenance amounted to R1.5 billion. Ensuring the longevity of assets is very important and the increase shows good management principles.
· The financial year has also seen an increase in the City's available cash and cash investments, rising by R0.72 billion to over R4.72 billion. The City's reserves and provisions are fully cash-backed ensuring a stable liquidity position.
· The report reflects a 17.47% increase in revenue from 2009, which includes growth in the property market and high tariff increases for electricity arising from high bulk costs. Overall, actual revenue of R16.5 billion was 99.35% of the amount budgeted for.
· The City reports a very good gearing ratio (i.e. debt to revenue) of 26.09%. This figure is well below the 50% considered to be an upper benchmark for municipalities, which indicates that the City's borrowings of R5.8 billion remain at a sustainable level with revenue comfortably covering its debts.
· In terms of collections, the City's payment ratio has increased from 94.07% in 2009 to 95.17% for the year ended June 2010. The total debtors older than one year amounts to R2.8 billion. This amount is fully covered by a bad debt provision, but the City will continue to pursue outstanding amounts where the debtors can afford to pay.
· The report reflects a R100 million reduction in debt owed to the City by government departments in various spheres. The City will continue to follow up with government departments to ensure that this figure is further reduced.
The City invested in two flagship projects this year, namely the 2010 FIFA World CupTM and the Integrated Rapid Transit (IRT) system. Both projects seek to provide long-term benefits for Cape Town, in the form of infrastructure.
The Cape Town Stadium was handed over for the 2010 FIFA World CupTM, ahead of schedule, on 14 December 2009. There was an estimated completion cost of R4.36 billion.
The IRT project will revolutionise public transport in Cape Town over the next 20 years, as it is implemented. Total capital expenditure to date on the project is R1.05 billion. Phase 1A should be completed by 2013, at an estimated cost of R4.6 billion. The investment in road transport during the year amounted to R1.6 billion.
Less prominent in the public eye, but equally high on the Council agenda, has been the ongoing upgrade to the City's bulk water, sewage and electricity systems.
The positive financial position was further confirmed by the City's assessment from the independent credit ratings agency Moody's, earlier this year. For the fourth consecutive year, the City managed to retain its double-A credit-rating with stable outlook in the Moody's annual rating review.
"This is a significant achievement. This prized rating provides investors and the community with confidence in the financial leadership and management of this municipality. A strong rating allows for a lower interest rate from banks and other financial institutions, which places the City in a stronger financial position," Alderman Neilson said.
The City of Cape Town is rated as the highest of the five metropolitan municipalities rated by Moody's in South Africa, whose ratings span from Aa2.za to Aa3.za. It compares favourably with the other large metros in South Africa in terms of both budgetary performance and management.
Recently the City achieved an additional short-term issuer rating of P-1.za from Moody's. A good issuer rating means that investors are of the opinion that the City has the ability to honour unsecured financial contracts and obligations.
Statement issued by Alderman Ian Neilson, Executive Deputy Mayor & Mayoral Committee Member: Finance, City of Cape Town, September 7 2010
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