City of Tshwane ups credit ratings
Global Credit Rating (GCR), a leading emerging market-focused ratings agency that rates the full spectrum of security classes, has indicated that the City of Tshwane is on track to further improve its credit ratings.
GCR, which employs the largest team of ratings analyst in Africa and accounts for over 60% of all recorded ratings on the continent, accorded the City of Tshwane a long-term national South African (ZAR) currency credit rating of A (“single A”) and short-term national ZAR currency credit rating of A1- (“single A one minus”).
According to GCR, the rating is supported by Tshwane’s status as the administrative capital of the country and servicing a population of around 2.5 million people. Further, the City of Tshwane has demonstrated sustained strong growth in income levels over the review period and is expected to report above average growth going forward.
GCR took cognisance of the fact that operating cash flows over the review period have been insufficient in addressing the Municipality’s capital expenditure requirements, necessitating sustained large increases in borrowings to fund the shortfall. Furthermore, Tshwane expects to embark on a five-year, R10 billion bond programme, with the first tranche of R1.5 billion to be issued in 2012.
Notwithstanding higher future debt levels, gearing metrics are expected to remain below the level of 40% achieved in 2011.
Cash holdings advanced 109% to R514 million in 2011. Notwithstanding this, the Municipality continues to display relatively weak liquidity metrics when compared to its peers. In this regard, GCR notes the various initiatives undertaken by the Municipality to improve its liquidity position in 2012 and beyond, although this is likely to remain a challenge.
City of Tshwane