Fitch affirms Johannesburg City’s rating, outlook stable
Ratings agency Fitch Ratings has affirmed the City of Johannesburg long-term local currency issuer default rating (IDR) at 'BBB' with a stable outlook.
It also affirmed the national long-term rating at 'AA-(zaf)' with a stable outlook, the national short-term rating at 'F1+(zaf)' and the national senior unsecured ratings on its outstanding bonds at 'AA-(zaf)'.
“The ratings reflect the city’s important status as the largest city in South Africa; its sound management, with a fair degree of sophistication, and successfully tested access to capital markets; and strong and stable financial profile, with sustainable debt and improved liquidity,” the agency stated.
The ratings also took into account an operating environment that is under pressure from high unemployment and strong demographic growth, it added.
KEY RATING DRIVERS
Fitch pointed out that the Johannesburg metropolitan municipality contributed about 16% of national gross domestic product (GDP) and that activity generated by the implementation of the city's R100-billion ten-year investment plan would support the performance of the city’s economy and lead to average GDP growth of 2.5% a year over the medium term.
Further, the agency said the city’s debt was sustainable with the city expected to maintain its debt to revenue ratio below its self-imposed cap of 45% over the medium term.
It also highlighted that the City of Johannesburg’s operating margin had recovered to a “sound” 14% at the end of June, from 11.4% in 2013. The city was also expected to maintain this margin at between 14% and 15% over the medium term.
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