GCR has reaffirmed the national scale ZAR currency ratings of Buffalo City Metropolitan Municipality (“BCMM”) at A (single A) and A1- (single A one minus) in the long and short term respectively. BCMM has been designated as a metropolitan municipality, effective from 18 May 2011. The metro status grants BCMM exclusive powers pertaining to building regulations, local tourism, municipal airports, municipal parks and recreation, health services, public transport, cemeteries, beaches, water and sanitation, and general municipal planning. Furthermore, BCMM is expected to be a recipient of the fuel levy grant, and other grants afforded to category A municipalities.
Capex has grown steadily in recent years and significantly exceeded operating cash flows in F10. This necessitated the utilisation of cash reserves to fund the shortfall, which, in turn, has served to place increasing pressure on liquidity measures. Notwithstanding this, given the sharp rise in total income, as well as a reduction in borrowings, gross gearing declined to a review period low in F10. Further, cash holdings continued to fully cover total debt in F10. Going forward, however, on the back of significant new borrowings in F11, gearing is expected to increase in the short term, albeit remaining at manageable levels.
Insufficient audit evidence and an inability to verify closing balances and comparatives (as highlighted by the Auditor General) pose a significant concern and challenge for the municipality. As such, BCMM is engaging with a service provider to rectify the findings of the Auditor General.
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