Picture: REUTERS
Picture: REUTERS

Moody’s has criticised the city of Cape Town over its handling of the water-supply crisis, saying it will have severe consequences for the city’s long-term finances.

Daniel Mazibuko, a Moody’s associate lead analyst, said on Monday that the city’s initial response had been tardy, despite the lack of diversification of supply having been identified as a problem for a decade or more.

Instead, the city had focused on demand management, despite a rapidly growing population.

The crisis would have a range of financial effects on the city in the current financial year, despite a Day Zero event now being declared unlikely to happen in 2018, he said.

"Moody’s estimates that capital expenditure related to water and sanitation infrastructure could be between R8bn and R12.7bn over the next five years."

The report is an update to the markets and does not constitute a rating action. It comes after a January report in which Moody’s calls the crisis "credit negative". The city is on review for a downgrade from a Baa3 rating.

That warning came just after Cape Town advanced its estimate for Day Zero — the day piped water supply to most of its 4-million residents will be suspended — by 10 days to April 12. However, Mmusi Maimane who’s DA governs the city and the Western Cape, said last week that Day Zero would not happen in 2018.

Cape Town’s water revenue of R3.9bn represented 10% of its total revenue for 2017.

"It is likely that all of the city’s economic sectors will be affected … with tourism and agriculture most exposed," said Mazibuko.

Judy Lain, a marketing officer at Wesgro, the Western Cape’s tourism promotion agency, said the agency had understood from the beginning that the water crisis could have a negative effect on tourism and that it had developed appropriate responses.

A severe drought afflicting the Western Cape is expected to cut agricultural output by 20% in 2018, decimating the wheat crop and reducing apple, grape and pear exports to Europe, according to the national government.