The City of Tshwane’s outlook was revised to positive by global rating agency, GCR, also part of Moody’s.
GCR said the reason for the upgrade is, despite the City’s financial constraints, weak liquidity, and governance inefficiencies, there are ongoing recovery initiatives, expected to result in a further improvement in its fiscal position, whilst liquidity risks have eased.
The City was previously given a negative score, along with most South African municipal and public sector organisations, due to operating underperformance and rising responsibilities contributing to financial distress and a deterioration in service delivery.
The GCR said in its April report, Tshwane’s financial profile remains very weak, although ongoing recovery initiatives are starting to show some signs of improvement in operating performance.
“The Metro reported another operating surplus (after capital transfers) of ZAR2.1 billion in the fiscal year to 30 June 2024 (fiscal 2023: ZAR1.3 billion), which contrasts to previous large deficits. This has been a result of better billing accuracy, tariff increases, and interest earned from outstanding debtors, whilst at the same time restraint has been shown in terms of expenditures. That said, cash flows remain insufficient to allow for sustainable infrastructure renewal. To this end, the Metro’s capital infrastructure and repairs and maintenance spend remain well below national norms, thus hampering service delivery. The financial constraints have been largely due to debtor’s collection challenges, with the debtors’ book registering at an even higher ZAR29.9 billion at March 2025 compared to ZAR28.3 billion at fiscal 2024 (fiscal 2023: ZAR21.8 billion). Despite intensifying efforts, Tshwane’s collection rate remained stagnant at 90% in fiscal 2024.”
Despite all this, the Metro is expected to improve its ability to generate increasing cash flows to support its financial recovery.
Tshwane’s announced draft budgets for fiscal 2026, was viewed as a positive step, pointing to a fully funded budget.
GCR said as a result, its assessment on liquidity has improved moderately, although coverage metrics remain constrained. For example, Days cash on hand (excluding unspent grants) have strengthened to 18 days in fiscal 2024 from levels well below 10 days previously.
This was on account of higher reported cash balances at year end of ZAR2 billion (fiscal 2023: ZAR1 billion) largely due to reclassification of highly liquid investments. Similarly, the current ratio also increased to 0.6x from 0.4x, albeit still very weak.
The City has also made repayment plans with major creditors, which has eased liquidity risks.
This City’s debt to Eskom has also decreased, to ZAR5.6 billion as of March 2025 from ZAR6.7 billion, at November 2024.
The GCR also said “we also note that the sinking fund currently stands at ZAR473 million, which is expected to continue to accumulate and be used towards redeeming the ZAR1.2 billion bond due in June 2026.”
As a result of reductions in gross debt and inability to access new lines of funding, gearing metrics remain relatively moderate, with net debt to total income decreasing to around 16% in fiscal 2024 (fiscal 2023: 22%).
GCR would downgrade the City if it does not meet debt or creditors repayments as they arise; audit outcome regresses and/or if political turmoil resurfaces, thus preventing the Metro from implementing its recovery plan.
Picture: Tshwane Economic Development Agency