The City of Johannesburg's financial stability has been given a big thumbs-up.
On Friday December 18 global ratings agency Fitch upgraded the City's credit rating by a notch in what Executive Mayor Councillor Parks Tau described as “a credible endorsement of Johannesburg’s financial stability". The upgrading of the City's national long-term rating and the national senior unsecured rating on outstanding bonds from AA- to AA, and the affirmation of its national short-term rating at F1+ with a stable outlook came in the midst of a gloomy economic situation in the country and elsewhere.
Mayor Tau said Fitch's thumbs-up was “an affirmation that indeed the City is a safe and preferred destination for investment by investors. It is a credible endorsement of Johannesburg’s financial stability at a time of great uncertainty in the global markets, rising interest rates and currency fluctuations. The rating is also a reflection of the quality of leadership and their ability to manage an annual budget of more than R50-billion”, he said.
“This is a clear reflection of a city that is anchored on transparency, accountability and clean governance, which also justifies our position as an economic hub of South Africa.”
In 2004, the City issued a COJ02 credit-enhanced bond that was 40% partially guaranteed by International Financing Corporation (IFC) and Development Bank of Southern Africa (DBSA). This resulted in Fitch assigning an AA+ rating, a notch higher than the issuer rating of AA.
The partially guaranteed COJ02 bond still has an outstanding amount of R333-million to be redeemed by September 2016. Fitch has also assigned the City a long-term local currency Issuer Default Rating (IDR) to allow it to source funding in the Eurobond Market.
The agency affirmed Johannesburg’s Local Currency IDR at BBB with a stable outlook. This reflects Fitch’s expectations of Johannesburg’s low debt over the medium term.
This also affirms the robust budgetary performance of the City by international standards as well as the conservative financial management aimed at maintaining high levels of liquidity and potential national support in light of Johannesburg’s important status as the largest city in South Africa.