Rating drop for Joburg

The City of Joburg says ratings agency Moody’s has changed the outlook on its debt to negative from stable.

Moody’s affirmed Johannesburg’s long-term issuer and debt ratings of Baa3 (global scale, local currency) and Aa1.za (national scale, local currency) and shortterm issuer ratings of P-3 (global scale, local currency) and P-1.za (national scale, local currency).

Moody’s said positive factors underpinning its credit opinion included that Johannesburg is the largest city in South Africa with more than five million inhabitants, so it has a large tax base and self-generates over 80% of its total revenue. The city also has manageable levels of net direct and indirect debt relative to its operating revenue.

Moody’s expected Johannesburg to maintain debt levels of 38% of operating revenue on average over the next three years. However, it said liquidity pressures had increased and it expected this would be the case going into next year as Johannesburg increased capital expenditure.

To address Moody’s concerns, the city said it had several initiatives such as implementing a more effective billing management policy. Johannesburg will also improve controls and systems, implement strict credit control, reduce bad debt, develop a billing and payments portal and increase use of e-services. – ANA