Cape Town’s Credit Supported by Water-Supply Moves, Moody’s Says

JOHANNESBURG (Capital Markets in Africa) – Moody’s Investors Service said investment in the water sector of Cape Town, the South African city hit by shortages in the past two years, will bolster its economic strength and support its credit profile.

The coastal city plans to diversify its water supply and better manage demand to reduce the chances of future water restrictions, with about half of its $692 million borrowing during the next three years going toward water and sanitation expenditure, Moody’s said in a statement.

“A resilient water sector is critical for the health of Cape Town’s economy and the city’s fiscal position,” Zoe Jankel, a senior Moody’s analyst, said in the statement. “New investment will enhance the resilience of Cape Town’s water sector and support its credit profile.”

Moody’s said the city’s strong capacity to generate revenue will allow it to effectively manage higher debt levels. Cape Town in 2017 and 2018 placed restrictions on water use as it suffered the effects of the worst South African drought on record. Residents were restricted to 50 liters a day until last October, when improved rainfall restored levels at crucial reservoirs.