BCM gets high marks in the financial stakes

They may be in and out of court over business shenanigans and caught in the middle of bizarre council faction fights, but this week metro bosses were patting themselves on the back after a ratings agency found that Buffalo City Metro has the best financial profile in South Africa.

SOUND JUDGMENT: A ratings agency found that Buffalo City Metro has the best financial profile in South Africa Picture: NIGEL LOUW

Independent Ratings Afrika gave BCM the highest score of all eight metros, rating it at 73 out of 100. Cape Town came second with a score of 72.

However, measuring a financial profile is only one of a number of areas analysed and Ratings Afrika analyst Leon Claassen said BCM came second behind Cape Town in the final tally.

However, he said: “Buffalo City’s overall financial sustainability score of 66 out of 100 reflects an adequate level of sustainability and a great measure of consistency over the last four years”.

Claassen said this picture emerged after they analysed recently published audited financial statements for the year ending in June 2016.

He said BCM slipped from being judged the most financially stable metro, to come second behind Cape Town, because:

lBCM’s spending on infrastructure at 2.7% of budget was weaker than Cape Town’s 8.9%;

lSpending less on repairs and maintenance could negatively affect the quality of the assets adversely especially because of “an increased risk of service disruptions”; and

lBCM’s services to residents were affected by a lack of affordability.

BCM chief financial officer Vincent Pillay last featured in a Saturday Dispatch photograph in the dock after being gathered up with three other BCM senior officials and politicians in a Hawks’ net and charged on two counts of fraud.

But this week he emerged in a much better mood saying he was very pleased with the positive findings of the independent ratings agency.

He quibbled with the agency’s finding that the percentage BCM spent on repairs and maintenance was less than Cape Town’s, arguing BCM did its sums based on what it would cost to replace and repair infrastructure at today’s more expensive prices, unlike other metros which “record them at historical cost”.

He said: “As a result, our percentage of expenditure on repairs and maintenance is reported at a lower percentage.”

City spokesman Sibusiso Cindi was upbeat: “The rating agency is an independent organisation and we thus welcome the results. We are excited that Buffalo City has a strong liquidity position, currently sound with a liquidity surplus (net current assets) of more than R2.1-billion, and is displaying a growing trend. This means the city is doing well in terms of our finances. We hope this will translate in improved service delivery,” he added.

Claassen said they analysed the recently published audited financial statements for the year ending June 2016 and drew up their latest municipal financial sustainability index (MFSI) from Ratings Afrika.

The final placings were: Cape Town 70, BCM 66, eThekwini 60, Ekurhuleni 59, Nelson Mandela Bay 53, Johannesburg 41, Mangaung 36 and Tshwane 36.

Buffalo City’s weakest component was an operating surplus of only R25-million last year.

Although it is an improvement over the deficit of R137-million in 2015, Claassen said this surplus was too “inadequate” for long-term capital “formation and the expansion of its infrastructure”.

The ratings agency found that over the last three years, Buffalo City spent R3-billion on infrastructure development, “which is ample for the size of its revenue base”.

It found BCM spends an average of R1270 on every resident per year. — mikel@dispatch.co.za


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