CITY OF JOHANNESBURG METROPOLITAN MUNICIPALITY - city of johannesburg:moody's rating recent developments

city of johannesburg:moody's rating recent developments

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: COJ07
ISIN No: ZAG000085044
Bond Code: COJ08
ISIN No: ZAG000137571
Bond Code: COJG01
ISIN No: ZAG000116708

Communication to Investors

MOODY’S RATING RECENT DEVELOPMENTS

Moody’s has today changed the outlook for the City of Johannesburg (the City) to negative from stable
and affirmed its long-term issuer and debt ratings of Baa3 (global scale, local currency) and Aa1.za
(national scale, local currency) and short-term issuer ratings of P-3 (global scale, local currency) and
P-1.za (national scale, local currency).
Moody’s has cited a number of positive factors which underpin their credit opinion.

    ?   The City is the largest city in South Africa with approximately 5 million inhabitants. By virtue of
        this, the City has a large and robust tax base, which is evidenced by its ability to self-generate
        over 80 per cent of its total revenue;
    ?   The City has manageable levels of net direct and indirect debt relative to its operating revenue.
    ?   Moody’s expects the city to maintain debt levels of 38% of operating revenue on
        average over the next three years.

Moody’s note in their review report that “liquidity pressures facing the City have increased and Moody’s
expects that this will be the case going into 2019 as the City increases capital expenditure”. The City’s
liquidity ratio has however shown slight improvement in the 2017/18 financial year.

In order to address the concerns raised by Moody’s, the City has set out on the following key initiatives:
     ? Implementation of a revised and more effective billing management policy that complies with
         legislative prescripts and by-laws;
     ? Update and roll-out of standard operating procedures for revenue processes to improve
         controls and systems;
     ? Implementation of strict credit control processes;
     ? Reduction of uncollectable debt;
     ? Development and implementation of a billing and payments portal;
     ? Development of a customer-centric approach;
     ? Increase in the use of e-services.
24 October 2018

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

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