Quick answer: .capetown can support local SEO, but it is not a shortcut
A .capetown domain can make your location clearer to users and can support a local brand, but it does not automatically push a weak website to the top of Google.
Search engines still need useful content, clear service pages, technical quality, internal links, backlinks, location signals and a real business presence. Treat .capetown as one local signal, not the whole strategy.
If the domain fits your market, start on the .capetown domain page. Then build the local SEO around the business, not only around the extension.