SA cities’ financial management is in decline, says report
Ratings Afrika says SA cities have substantial revenue bases to help them out of their financial problems, with Cape Town a clear winner
The financial sustainability of most of SA’s large cities deteriorated in the 2018/2019 financial year, with only Cape Town showing a marked improvement, the most recent annual sustainability report by Ratings Afrika notes.
Ratings Afrika is a local ratings agency specialising in governance opinions of companies, municipal and provincial government, and state-owned enterprises. The sustainability index is based on a score sheet of an entity’s six components: operational performance, liquidity management, debt governance, budget practices, affordability and infrastructure development.
The City of Cape Town was the only metro council that improved its financial sustainability to a score of 74. A score of 50 is considered unsustainable.
Buffalo City, Ekurhuleni, Ethekwini, Mangaung and Tshwane all dropped in the index. Bottom of the pile and taking the biggest drop was Mangaung, which was placed under administration in December and which Ratings Afrika scored at 28. Also in extreme difficulty is Tshwane with a score of 36.
Both metros experienced serious liquidity shortfalls during the year under review.
Only Cape Town has the financial resources to withstand a shock such as Covid-19, according to the report.
Despite the deteriorating trend, SA’s cities are of “sufficient size and have substantial revenue bases that could provide the capacity to trade themselves out of their financial problems under normal circumstances ... but the adverse effects of the Covid-19 lockdown on the finances of municipalities has changed the situation dramatically”, the report said, adding that only Cape Town is likely to weather the storm without additional support.
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