GCR AFFIRMS CITY OF TSHWANE METROPOLITAN MUNICIPALITY WITH AN A RATING
GCR has affirmed City of Tshwane Metropolitan Municipality with an A(ZA) (single A) long term national scale debt rating. In addition, the rating outlook was confirmed as Stable.
GCR says the municipality’s status as the administrative capital of South Africa was favourably considered.
“The metro has evidenced successive increases in borrowings over the review period. Going forward, substantial new borrowings are budgeted over the period to F15, as Tshwane expects to embark on a five-year R10bn bond programme (to support its vast capex programme), with the first tranche of R1.5bn expected to be issued in F13,” said GCR in a statement.
As such, GCR says, gross gearing metrics are budgeted to gradually trend upwards over the medium term (from 34% in F12), reaching a high of 39% by FYE15, albeit in line with historical levels.
According to GCR, Tshwane exhibits a relatively high reliance on government grants to fund operations and infrastructure spend but said the fairly high level of predictability regarding the amount and timing of these transfers is positively viewed.
Furthermore, GCR says that while it notes a gradual rise in cash holdings in recent years, liquidity levels are deemed low. In this regard, key liquidity ratios have remained constrained and are notably weaker than the peer average.”
GCR also says consecutive working capital absorptions present a key challenge. “This risk is exacerbated by relatively high tariff increases that continue to be passed onto consumers, which may worsen collection efficiency of an already long dated debtor’s book.”
About Global Credit Ratings
Global Credit Ratings (GCR) is a leading emerging market focused ratings agency that rates the full spectrum of security classes. With regional headquarters in Johannesburg, Lima and Karachi, GCR has several African and 12 sub-regional offices globally. It employs the largest team of ratings analyst in Africa and accounts for the largest majority of ratings recorded on the continent. GCR rates a range of companies and sectors including Banks, Insurance, Corporate, Local Authorities, Asset Management and Funds and Structured Finance; and is accredited in all markets where this is a requirement. The group, via its International Ratings Group affiliates, rates 1000 organisations and debt issues in over 30 countries across 4 continents. GCR’s key shareholders include the DEG/KFW group and PROPARCO.
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