Jozi’s financial performance solid

30 July 2015

 

The City of Johannesburg’s finance management – including its 10-year R100-billion infrastructure investment plan and its innovative debt redemption strategy – has been given a thumbs up by leading ratings agency Fitch, cementing its position as South Africa’s No 1 metro, financially speaking.

 

Fitch affirmed the City’s long-term local currency issuer default rating at BBB with a stable outlook.

 

The national long-term rating stood at AA-(zaf) with a stable outlook, while the national short-term rating sat at F1+(zaf). This development comes in the wake of a global economic slowdown, with advanced economies projected to perform in the region of 1.8% and 2% in the medium term. The R100-billion infrastructure investment plan is expected to cushion the City against the global economic slowdown, while the Redemption Fund is a testament of the “City’s insatiable appetite for innovating its way out of challenges”.

 

Fitch said in its assessment: “Johannesburg continues to perform in line with Fitch Ratings’ expectations, with an operating margin close to 15% of revenue in the 2015-2017 fiscal years (to end June).”

 

The agency also said that, despite the economic slowdown, it expected “activity generated by the implementation of the 10-year R100-billion investment plan to support CoJ’s economy, leading to average GDP growth of 3% per annum over the medium term, conducive to an expanding tax base [and] coupled with a slightly rising population”.

 

The City’s Member of the Mayoral Committee for Finance, Councillor Geoffrey Makhubo, said Fitch’s remarks reaffirmed the correctness of the City’s strategy.

 

“The City of Johannesburg, which is the first metro to establish a debt-sinking fund (Redemption Fund), is proud of its achievement. This success has led to other metros following suit,” MMC Makhubo said.

 

City Manager Trevor Fowler said he was “overjoyed” by the positive feedback on the City’s prudent financial management.

“Some challenges remain, and we are seized with them. But we are on the right path,” he said.

 

It appears that the only reason holding Fitch from giving the City a positive rating was the country’s negative outlook. Reggie Boqo, the City’s Group Financial Officer, said it was quite telling that Fitch’s commentary limited the possibility of a positive rating outside what the City could do.