Cape Town rated most financial sustainable metro in South Africa

The City of Cape Town is the most sustainable metro in South Africa according to a Ratings Afrika report just released. Cape Town received a sustainability score of 74 for 2019, the year in review, while the average for all the metros in South Africa is 48.

Cape Town is the only metro to have strengthened its financial sustainability over the year in review and ‘is the only one that can be considered sustainable with the capacity to absorb financial shocks’ as per the report.

Ratings Afrika’s Municipal Sustainability Index looks at operating performance, liquidity management, debt governance, budget practices, affordability and infrastructure development.

According to the report, financial sustainability is defined as: ‘The financial ability to deliver services, develop and maintain the infrastructure required by its residents, without unplanned increases in rates and taxes, or a reduction in the level of services.

Furthermore the municipality should have the capacity to absorb financial shocks caused by natural, economic, political and other adversities without external financial assistance.’

“With the help of our residents, we successfully managed to get through the drought crisis and build greater resilience into our operations. With the COVID-19 crisis thus far, the City and the Western Cape Government have demonstrated good management by taking advantage of the lockdown periods to make sure we have enough clinical capacity to deal with the pandemic.

We are leading the way in South Africa by fulfilling our basic service delivery mandate as well as providing enhanced essential COVID-19 services.

This is only possible because we work really hard to ensure that this municipality is sustainable, resilient and accountable to its people,” said the City’s Executive Deputy Mayor and Mayoral Committee Member for Finance, Alderman Ian Neilson.

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The Ratings Afrika report further notes (with the exception of Cape Town) a weakening trend of financial sustainability among the metros, with the average score of 48 being the lowest in five years.

The report emphasises that these ratings are based on information collected prior to the ‘devastating effects of the current lockdown caused by COVID-19’.

The report states Cape Town is the only metro whose operating performance is at ‘an adequate level to provide sufficient funds for its operations to cover expenses, to provide the funding capacity for infrastructure development and to build the necessary reserves to absorb financial shocks’.

Cape Town has received a liquidity management score of 94 compared to the South African average of 39 and generally, the report indicates a weakening trend of metros to absorb financial shocks.

The report notes Cape Town’s collection rate is the highest in the country – more than 95% average up to the year ending June 2019, with ‘sound cash management policies and practices’.

The report concludes by stating: ‘At this moment, it is only Cape Town that has the capacity to weather the corona virus storm successfully’.

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