Editorial: Rating a boost for metro’s finances

NEWS of an increase in the credit rating of the Nelson Mandela Bay Municipality could not have come at a better time.

Today we report that global rating agency Moody’s has placed the metro at Aa1.za, three notches up from its previous standing.

Internationally, the Bay stands at Baa2 – medium grade, with moderate credit risk.

The agency attributed this to the city’s improved financial performance and declining debt levels in the 2014-15 financial year. This is good news. It is a credible and independent validation of the management of the metro’s finances and is likely to boost public confidence, especially that of investors.

The rating means the metro is in a much healthier position to borrow, at a cheaper rate, to fund its massive infrastructure projects.

It is common cause that, for example, the metro’s water and electricity infrastructure desperately needs massive investment that would curb our never-ending water leaks and electricity losses.

This is crucial to provide better services to households and to improve the quality of life for the million people who live in this metro.

Equally important, we need a major infrastructure revamp to provide reliable water and power supply to businesses – big and small – who operate in our city, to help them grow and to be globally competitive.

In welcoming the rating, mayor Danny Jordaan has again cited that the metro was under-borrowed and had cash reserves of R2-billion in the bank.

The R2-billion figure has been bandied about on many public platforms as the strongest evidence yet of the city’s financial standing.

While this is commendable, we believe that in making such statements, the mayor also has a responsibility to explain, at every moment, that of this money R623-million is grant funding which must only be spent on specific capital projects by next month.

The rest is – as required by the national Treasury – to maintain a healthy cost coverage ratio to cover municipal expenses for at least two months, should the metro not receive an income.

Failure to explain this, we believe, is not only disingenuous, it creates unrealistic expectations, particularly from those eagerly waiting for services to improve immediately.