CITY OF JOHANNESBURG METROPOLITAN MUNICIPALITY - Moody's rating recent developments - BIJHB

Moody's rating recent developments - BIJHB

CITY OF JOHANNESBURG METROPOLITAN MUNICIPALITY
(a municipality as described in section 2 of the Local Government Municipal Systems Act, 2000, duly
established in terms of Notice No. 6766, promulgated in the Provincial Gazette Extraordinary of 1
October 2000 in terms of section 12(1) read with section 14(2) of the Local Government : Municipal
Structures Act, 1998, as amended)
Issuer Bond Code: BIJHB
Bond Code: COJ05
ISIN No: ZAG000054339
Bond Code: COJ08
ISIN No: ZAG000137571
Bond Code: COJG01
ISIN No: ZAG000116708


MOODY’S RATING RECENT DEVELOPMENTS

Moody’s has on 19th November 2021 confirmed the City of Johannesburg’s ratings at Ba3/A1.za for
LT GSR and NSR respectively and assigned a negative outlook. The confirmation reflects the city’s
resilient operating performance and liquidity position, in the challenging operating environment. The
City’s cash position covers most of its immediate obligations. This resilience in operating performance
and liquidity position places the city in a favourable position to raise external funding.

The ratings have been assigned a negative outlook to reflect the constraints that the macroeconomic
environment shall continue to place on revenue collection, as well as expected pressure on financial
performance due to water and electricity challenges.

Confirmed Ratings:
    -     LT Issuer Rating, Confirmed at Ba3
    -     NSR LT Issuer Rating, Confirmed at A1.za
    -     NSR Senior Unsecured Medium-Term Note Program, Confirmed at A1.za
    -     NSR Senior Unsecured Regular Bond/Debenture, Confirmed at A1.za
    -     Senior Unsecured Medium-Term Note Program, Confirmed at (P)Ba3
    -     Senior Unsecured Regular Bond/Debenture, Confirmed at Ba3

On Review for Downgrade
    -     NSR ST Issuer Rating, Confirmed at P-1.za

Affirmations
    -     ST Issuer Rating, Affirmed NP

Outlook
    -     Changed to Negative from rating on Review


Moody’s has sited that a rating upgrade is unlikely, considering the negative outlook assigned
nevertheless, Moody’s will consider stabilizing the outlook if the City displays strong operating
performance and liquidity resilience to the expected macroeconomic pressure. Moody’s also
acknowledge that the City is characterised by good governance and budget planning, which should
help the City in managing budget pressure going forward.
Moody’s will consider a further downgrade of the ratings if it experiences deteriorations in operating
performance and liquidity position such that the credit profile is no longer in line with their current rating
levels.

Moody’s is of the view that although the country has moved down to the lowest level of lockdown,
municipal debtors’ receivables have been increasing by up to 25% for major cities such as
Johannesburg during FY2021, this reflects the financial strain that the low growth environment has had
on household income and thus revenue collection. With water and electricity supply deteriorating
significantly nationwide, municipal water and electricity bulk purchase costs are expected to rise further,
placing upward pressure on operating expenditure. These economic constraints are expected to
moderate operating performance over the next two years.

As an agile and responsive entity, the City continues to experience revenue growth underpinned by its
status as South Africa's business capital and main financial and economic centre. The City’s financial
management systems remains sophisticated and its economic base remains large and well diversified
enough to absorb any adverse effects of the changing global economic climate. Despite the negative
effects of the Coronavirus pandemic, the City is still able to maintain stable debt ratios, a healthy liquidity
position and still generate surpluses, all of which serve to lower risk to investors and stakeholders.



22 November 2021

Debt Sponsor
Absa Bank Limited (acting through its Corporate and Investment Bank division)

Date: 22-11-2021 02:45:00
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