URBAN councils in Zimbabwe are under growing pressure to restore basic services, rebuild infrastructure, and meet the expectations of rapidly expanding populations.
Roads, water supply systems, sanitation networks, housing developments, and waste management facilities all require long-term and predictable funding in order to work.
However, limited fiscal space, weak balance sheets, and controlled access to capital have made it difficult for many municipalities to finance these needs sustainably.
On this note, credit ratings are becoming an essential governance and financing tool. For Zimbabwe’s urban councils, credible credit ratings can support the revival of the municipal bond market while also reinforcing compliance with minimum service delivery standards.
Traditionally, urban councils in Zimbabwe depend on intergovernmental transfers, internally-generated revenue, and short-term facilities to fund operations and projects.
These sources are often insufficient and can be finished very easily. Transfers may be delayed, local revenues can be unpredictable, and short-term funding rarely aligns with the long economic life of infrastructure assets.
Keep Reading
- Chamisa under fire over US$120K donation
- Mavhunga puts DeMbare into Chibuku quarterfinals
- Pension funds bet on Cabora Bassa oilfields
- Councils defy govt fire tender directive
Municipal bonds offer a potential solution. They allow councils to have long-term capital matched to infrastructure timelines and spread the costs across users who benefit over time.
However, investors require transparency, discipline, and credible risk assessment before committing funds. This is where credit ratings play a decisive role.
A credit rating provides an independent assessment of a council’s capacity and willingness to meet its financial obligations. It checks revenue stability, expenditure management, debt levels, governance quality, and the institutional environment. For investors, this assessment reduces information gaps and allows pricing of risk.
In the absence of ratings, municipal bonds are difficult to structure and even harder to place. Investors either demand excessively high returns or avoid the market altogether.
A structured credit rating framework helps standardise risk assessment across councils, making municipal bonds more comparable and investable.
For Zimbabwe, the renewal of a functioning municipal bond market depends on restoring confidence.
Credit ratings are not a guarantee of success, but they provide a credible sign that a council’s finances have been independently reviewed and benchmarked against standards accordingly.
One of the most important, but often overlooked, benefits of credit ratings is their impact on internal behaviour. The rating process encourages councils to improve budgeting practices, strengthen financial reporting, and adopt clearer debt management policies.
Urban councils seeking or maintaining a rating are incentivised to align spending with realistic revenue projections, reduce arrears, and improve transparency. Over time, this discipline supports more predictable cash flows and better control over operating costs.
These improvements are not only relevant to investors; they directly influence a council’s ability to deliver basic services consistently.
Minimum service delivery standards such as reliable water supply, effective waste management, functional roads, and basic sanitation mainly depend on stable financing and efficient operations.
Credit ratings indirectly support these outcomes by promoting long-term planning and accountability. A council with a clear capital investment plan, supported by rated funding instruments are positioned in a better way to maintain and upgrade infrastructure.
Moreover, credit analysis usually considers service delivery risks, including operational capacity and maintenance of pending tasks.
Weak service delivery can negatively affect a rating, creating a feedback mechanism that pushes councils to address structural problems. In this way, credit ratings act as both a financial and governance tool, linking service delivery performance to market credibility.
Institutions such as ICRA Zimbabwe play a critical role in building this ecosystem. By applying structured and locally-relevant rating methodologies, a nation’s credit rating agencies help translate complex municipal realities into clear, comparable risk opinions.
For urban councils, engaging with a domestic rating agency offers more than a score. It provides diagnostic insights into financial weaknesses, governance gaps, and operational risks.
Over time, repeated rating exercises can track improvement, creating a performance narrative that both regulators and investors can understand.
Rated instruments fit more easily into these frameworks, enabling broader participation in municipal finance.
As confidence grows, the cost of borrowing can stabilise, maturities can stretch, and secondary market activity can slowly develop in the market. This cycle is important for improving Zimbabwe’s municipal bond market and reducing over-reliance on short-term or funding arrangements.
While the benefits are clear, the implementation of credit ratings at the municipal level is not without challenges. Data quality, inconsistent financial records, and governance constraints can complicate the rating process.
Some councils may initially receive lower ratings, reflecting structural weaknesses rather than immediate failure. However, these outcomes should be viewed as a starting point rather than a setback. Transparent ratings provide a roadmap for reform, helping councils prioritise actions that strengthen financial resilience and service delivery over time.
Conclusion
For Zimbabwe’s urban councils, credit ratings are no longer a theoretical concept or an external formality. They are a practical tool for restoring credibility, mobilising long-term capital, and reinforcing accountability in service delivery.
By supporting the resuscitation of the municipal bond market and embedding financial discipline into local governance, credit ratings can help urban councils move from reactive management to sustainable planning. With the involvement of institutions such as ICRA Zimbabwe, the foundations can be laid for a more transparent, investable, and service-oriented municipal sector — one that is better equipped to meet the needs of Zimbabwe’s growing urban population.
Chawoneka is chief executive officer of International Credit Rating Agency (Private) Limited. — ephraim@icrallc.com