On 13 July 2022, the Global Credit Ratings Co. (GCR Ratings) downgraded the City of Johannesburg's (CoJ) National scale long-term and short-term issuer rating class to A+(ZA) and A1(ZA), respectively. According to the report, the City's outlook is stable.
The GCR Credit Rating Announcement noted that the City's operating performance has remained relatively stable despite inherited weaknesses like service delivery backlogs and the Covid-19 disruptions. The MMC for Finance, Cllr Julie Suddaby, noted, "We must keep in mind that the City of Johannesburg under the coalition is addressing these weaknesses. The 2022/23 budget, themed "the Golden Repair" has these backlogs as a focus for service delivery. We are not surprised by the GCR findings; it means that what we know is confirmed by an independent body, and we are hard at work remedying the issues. It must be remembered that this rating is based on the financial results as at the end of the 2020/2021 financial year."
The metro reported income growth of 6.6% for FY21 (FY20: 5.1%) while expenditure grew by a slightly higher 6.9% but at a lower rate than FY20 (9.1%). This fact was attributed to staff costs running below budget because CoJ did not fill vacant funded positions during the year.
Other factors that came into play were that collection procedures couldn't be fully implemented, affordability issues for both residents and commercial property owners in the City, as well as the 18% increase of gross consumer debtors and bad debts provision equating to 81% of debtors (FY20: 82%).
Covid-19 disruptions continued to impact capital project delivery during FY21, while the repairs and maintenance rate improved slightly to 4.9% (FY20: 4.7%) but remains under the National Treasury guideline of 8%. GCR noted in the report that this is a key longer-term risk in that without adequate repairs and maintenance, service delivery can't improve.
The City of Johannesburg has consistently demonstrated its financial resilience as evidenced by the generation of recurring surpluses, maintenance of substantial cash balances and the continued rollout of the capital expenditure program despite the global economy.
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. In addition to the increased capital expenditure, should the City maintain stable debt ratios and generate surpluses, these actions will attract investment as they lower the risk to investors and stakeholders.
The City's efforts to improve service delivery and sustain financial stability are supported by its Multi-Party Government (MPG), which implemented tighter financial control measures, tightly managed supply chain management and strict cost containment measures. The current administration is working non-stop to ensure that the City's credit ratings improve, and the outlook remains stable.
ENDS
Issued by the MMC Finance, Cllr Julie Suddaby
For more information or an interview with MMC Suddaby, please contact:
Michelle Ashburner
Deputy Director: Communications and Stakeholder Management
MichelleA@joburg.org.za | 071 222 0977
21/07/2022
