The ratings on Buffalo City Metropolitan Municipality’s (“BCMM’, “the City” or “the Metro”) balance its conservative financial profile, against operating performance and debtors’ collection pressures exacerbated by the coronavirus pandemic. Cognisance is taken of BCMM’s status as a metropolitan municipality, although its economic base is small and less diverse than some of the larger metros. In terms of national GDP, BCMM contributes around 1.6%, with the Metro’s longer term average growth rate converging with weak national metrics given the challenging economic environment.
The Stable Outlook reflects our expectation that the Metro will maintain its conservative debt management and has sufficient liquidity sources to mitigate against the current cash flow pressures. If the Metro’s operating performance and liquidity deteriorate beyond our current expectations, negative rating action could be taken. Positive rating action is unlikely in the current weak economic environment.