Share this article

​2011-11-10: Joburg finances are stable and improving

THE City is committed to the continued improvement in its financial position.

The cash position of the City has improved significantly in the first quarter of the current financial year. This can be attributed to improved levels in the collection of revenue.

The performance in the first quarter of the 2011/12 financial year reflects that the City's revenue has turned the tide. The number of accurately billed customers has increased significantly.

Revenue collection has responded to the interventions made in billing and credit management. Back office re-establishment has also resulted in accelerated query resolution.

The City is making inroads in the collection of old debt as indicated by the 102% collection level achieved during the first quarter (July-September 2011).

Strategies that have been put in place to ensure continued improvement in revenue performance include:

Stratified customer base
Robust credit control
Prioritize roll-out of smart metering
The improvement in the collection levels has positively impacted the cash management strategies of the City. In the normal course of business, cash flow mismatches arise as a result of the natural timing differences between when cash is utilized and when operating inflows are received. To manage the mismatches general banking facilities or commercial paper are used after assessing affordability and pricing in the market. This practice is in line with the Council approved funding plan that takes into account the magnitude of the City's budget.

Unlike in the previous financial year where all commercial paper to the value of R2.7 billion, had been issued by September, in the current year the City had only issued R401 million by 30 September 2011.

The City has never defaulted on any of its obligations and anticipates that going forward it will continue to ensure that all its obligations are met timeously in responding to service delivery requirements.

Furthermore the City is actively reducing the borrowing levels going forward. Borrowing from the market will be limited to R1billion compared to previous highs of over R2billion.

The past three financial years have been characterised by a number of significant events that have had an impact on the financial position of the City e.g.

Preparations for the 2010 Soccer World Cup and the resulting stretch on the City's financial position in order to meet the national delivery targets
The global recession and its impact on customer payment levels
Billing challenges associated with the teething problems in the migration to SAP. The annual average collection rate at 30 June 2011 was 87% against a budgeted 93%.
The combined effect of these factors has been a declined liquidity position.

The City has always complied with Section 45 of the MFMA which prescribes that any short term debt issued needs to be repaid prior to the end of the financial year.

The City's credit rating was recently affirmed by Fitch for the 2011 year remaining unchanged at AA- with a stable outlook. This affirms the confidence in the City's ability to manage its finances. The City of Johannesburg has a Redemption Sinking Fund which was set up to redeem all bonds (long term) issued when they fall due. Contributions into this Fund are up-to-date, and therefore, bondholders' investment in the City of Johannesburg is not at risk.

Issued on behalf of:
Lungelwa Sonqishe
Acting CFO

Issued by: 
Kgamanyane Stan Maphologela 
Deputy Director: Customer Communications 
Revenue & Customer Relations Management Department 
Phone: 011 628 4728 
Fax: 011 358 3639 
Cell: 082 771 4874