Moody's: Cape Town's water plan 'supportive' of its credit profile

The City of Cape Town's water strategy is supportive of its credit profile, ratings agency Moody's noted in a research report.

Moody's on Wednesday evening issued the report, authored by Zoe Jankel, vice president and senior analyst - which comments on the city's recovery plans following the three-year drought.

"A resilient water sector is critical for the health of Cape Town's economy and the city's fiscal position," Jankel said. "New investment will enhance the resilience of Cape Town's water sector and support its credit profile."

The ratings agency also expects the city to effectively manage higher debt levels. Cape Town plans to borrow R9bn over the next three financial years to fund a capital programme of R25bn.

About half of the borrowings will be allocated to water and sanitation capital expenditure. The city will also restructure water tariffs, to account for the higher capital expenditure on water infrastructure, the report highlighted.

Cape Town will still have lower debt levels than other SA cities, Moody's said.

Moody's has the city rated at Baa3, with a stable outlook. The ratings agency had upgraded the outlook from negative to stable on Monday, Fin24 reported.

The water strategy is meant to make the city more resilient to climate change related risks.

"The new strategy will diversify the city's water supply, improve demand management and introduce new reliability standards to adapt the city's water sector to climate change-related risks and reduce the likelihood of future water restrictions," the report read.

Water demand

The city has nearly halved consumption so far, from 1.1 billion litres per day in 2016 to 600 million litres per day in 2018, the report indicated.

Although it is expected demand will rebound from the crisis consumption levels, the city has a plan to reduce demand over the long-term by using technologies that reduce usage, reducing non-revenue water like leakages and through informative campaigns.

The city's new build programme aims to develop an additional supply of 300 million litres per day by 2028. This is in addition to freeing up around 70 million litres of existing supply through demand management.

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