Moody’s upgrades City of Joburg’s rating

Moody’s raised Joburg’s global scale ratings from Baa3 to Baa2, the same level as the sovereign rating, while the City’s national scale ratings was raised by four notches up from A2 to Aa1.

Moody’s said it noted the City’s prudence and consistency in managing its finances.

The global scale rating of Baa2 is the highest possible rating that can currently be achieved by institutions with the best credit quality in South Africa.

Also, the City of Johannesburg is the only Metro to have achieved such a feat of a global scale ratings upgrade in the current round of rating reviews.

Among the reasons Moody’s upgraded Joburg included the City’s improved financial performance in the last three years, the decline in the net direct debt from 35 percent in 2011 to 30 percent in 2015, and the R10.2 billion investment on capital infrastructure during the 2015 financial year.

Johannesburg executive mayor, Parks Tau, in a statement said the successes and vote of confidence in the City came as no surprise, but was the result of Johannesburg’s sustained demonstration of its financial resilience.

“We identified financial resilience as a priority for the City, set a team to put together the City’s Financial Development Plan and pushed hard for its implementation. The accolades now received are an affirmation of the correctness of our strategies in managing the finances of the City,” Tau said.

Tau noted that Joburg was last year the largest per capita infrastructure spender in government, after national government itself.

“Words used by Moody’s today and Fitch Ratings Agency in December to describe the prudence with which our finances were managed are humbling. It’s important to stress that Johannesburg is a city least dependent on national government grants as we generate a bulk of our own finances,” Tau said.

Tau’s spokesperson, Phindile Chauke, said the benefit of this dual upgrade was that credit spreads on the City’s listed bonds should become narrow and make them more attractive to investors, while simultaneously lowering the cost of new debt incurred to fund capital expenditure.

“The upgrade is therefore expected to lower the relative cost of rolling out infrastructure in the City,” Chauke said.