Joburg sets sights on Moody’s upgrade after positive outlook

The City of Johannesburg, which is on the verge of financial collapse, said Moody’s Ratings’ positive outlook on the municipality’s credit assessment provides a path to an upgrade that the authorities will seek to achieve through better governance.

Moody’s affirmed the South African commercial capital’s Ba3 long-term issuer rating that had previously been on review for downgrade, according to a statement on 3 July.

“The confirmation of the City of Johannesburg’s ratings reflects a balance between its solid financial and economic fundamentals, with broadly stable operating performance, and a moderate debt burden, offset by a weaker governance and funding credit challenges,” Moody’s said.

About R2.1 billion of the city’s R7 billion budget deficit for this year is unfunded. It owes hundreds of millions of dollars to state electricity and water utilities and faces looming power cuts because of unpaid bills. Finance Minister Enoch Godongwana has threatened to halt R8 billion in state funding because the city signed a wage deal that he says is illegal and unaffordable.

Read:
How Moody’s rates Joburg’s financial outlook after its review
Johannesburg faces R2.1bn funding gap as its bills mount

Moody’s said it would consider upgrading the city’s rating if it demonstrated “consistently improving” governance in terms of budgeting and monitoring, as well as indications strengthening sovereign support.

Johannesburg will remain focused on strengthening its financial management and governance to ensure long-term sustainability, with the ultimate goal of securing future credit-rating upgrades, chief financial 0fficer Tebogo Moraka said in a statement on 4 July.

“The city views this rating action as an important milestone in restoring market confidence and reaffirming Johannesburg’s position as South Africa’s economic engine,” he said. “The administration will continue implementing reforms that improve governance, strengthen financial sustainability and support long-term infrastructure investment for the benefit of residents, businesses, and investors.”

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