City’s rating not reviewed
30 January 2018
Various media outlets have reported that the City of Cape Town is due for a credit rating downgrade in consequence of the water crisis which is not correct. The issuer comment released by Moody’s on Friday 26 January 2018 does not constitute a review for a credit rating downgrade but is rather a statement reflecting the crisis which the City finds itself in.
On 28 November 2017, Moody’s placed the long-term global scale rating of 12 South African regional and local governments and three government-related entities under review for downgrade, including the City of Cape Town’s Baa3 / P-3 long-term and short-term global scale issuer and debt ratings, but to date no rating action has been taken by Moody’s as yet. Neither the City’s long-term nor the short-term national scale issuer and debt rating of Aaa.za/ P-1.za were affected by this action and remains unchanged as yet.
Due to the severe water restrictions imposed by the City, which has resulted in a fall in consumption and associated water revenue and a consequent increase in operational costs linked to the management thereof, the City has made sufficient provision for these items in their mid-year adjustment budget. The City, however, still maintains its strong liquidity position despite these challenges.
It has further been reported in the media that the City has received a qualified audit report which is again not true. The City’s annual report, which will be tabled at Council on 31 January 2018, indicates that the City received an unqualified audit opinion, which will also be the City’s 14th consecutive unqualified audit opinion. However, the City did regress from an unqualified audit with no findings, i.e. a ‘clean audit,’ to an unqualified audit with findings.
Issued by Johan van der Merwe, Mayoral Committee Member of Finance, City of Cape Town, 30 January 2018
