PRESS RELEASE FROM THE CITY OF CAPE TOWN:
The City of Cape Town invites members of the public to
comment on its proposal to take up a substantial loan that has been offered at
a highly subsidised interest rate to help it refurbish and expand several
wastewater treatment plants in Cape Town over the next years. The multi-million
rand projects are being implemented at locations across the metro and the loan
funding will assist to spread the costs required for these projects to avoid
excessively burdening ratepayers.
Members of the public have until 25 September 2018 to
comment on this proposal.
According to a press statement received from the City of
Cape Town, this morning, the loan funding offer from the German
government-owned KfW Development Bank comprises 80 million euros in total. The
equivalent amount in rand will be determined at the date of signing the
agreement, which is envisioned to be in November 2018. That is not to say that
the entire amount would be taken up by the City.
The City has chosen to obtain funding from KfW Development Bank
after it was approached by this institution and a funding offer was submitted
to the City at a highly subsidised interest rate. The City then advertised a
Request for Funding Proposal to compare this offer to the market. Responses
were received from both local and international banks and KfW proved to have
the best rate compared to the proposals received, being 2% lower than the local
market rates, according to the statement.
The rand amount of the unsecured loan would be fixed upfront
and repaid over the term of the loan, which is 15 years.
“The City approved its budget during May 2018 after a
comprehensive public participation process in which the City’s funding strategy
to fund its capital programme was also approved. All costs have already been factored
into the tariffs which were implemented from 1 July 2018 and would therefore
have no further impact on such tariffs due to the taking up of the funding,”
says the City’s Mayco member for finance Johan van der Merwe.
“The taking up of debt is necessary to spread the related
costs over the lifetime of the wastewater projects to mitigate against an undue
burden on the current ratepayer. All cost implications have been considered in
terms of affordability in advance.
“Cape Town is a growing city and it is important that we are
able to sufficiently invest in infrastructure over the coming years. Our debt
level as a City is at an acceptable rate and the City will continue to follow a
conservative approach to loan funding while balancing what investment is
required for the metro going forward. The City continues to exercise sound
governance and prudent financial management,” he adds.
Earmarked projects include work at the Cape Flats,
Bellville, Mitchells Plain, Borchard’s Quarry, Hout Bay, Gordon’s Bay and
Zandvliet wastewater treatment plants.
The interest rate is calculated on a Euribor basis plus a
margin, which takes the grant element into account. ‘Euribor’ refers to the
Euro Interbank Offered Rate which is a daily reference rate that is published
by the European Money Markets Institute. This rate is then swapped into the
rand equivalent (indicative rate at 15 August 2018 is 8,25 to 8,75%).
How to comment
The City invites written comments or representations from
members of the public, the National Treasury and the Western Cape Provincial
Treasury in respect of the proposed debt.
Comment may be sent via email to
janinemarion.abrahams@capetown.gov.za
Any person who cannot write may come during office hours to
the 7th Floor, Civic Centre, 12 Herzog Boulevard, Cape Town where assistance in
transcribing that person’s comments or representations will be given.
Please also see http://www.capetown.gov.za/City-Connect/Have-your-say/Issues-open-for-public-comment/comment-on-proposed-intention-to-incur-long-term-debt
