By Thomas Thale
FITCH Ratings, an international ratings agency, announced on Friday that it has upgraded the City of Johannesburg's long-term rating from (BBB+), signalling adequate ability to repay debts to (A-) signifying strong credit risk.
The short term F2 rating of the city remains unchanged, indicating that the city's ability to repay its short-term debts remains satisfactory.
Fitch based their opinion on various improvements in the city, including the Council's "fiscal prudence, healthy liquidity, and stronger financial planning and budgeting".
In a statement issued on Friday, Fitch notes that over the past four years, the city has "adopted legislation, rationalised its administration and decentralised its departments into separate legal operating entities". Fitch ascribes these positive changes to "political continuity and good management which have had a positive effect on the city and its ratings".
Roland Hunter, executive director of finance and economic development in the city, ascribed improvements in the city finances to "tight fiscal discipline, adherence to policy and a strong leadership directed by one vision of building a world class city is gradually paying off".
Jason Ngobeni, treasurer of the city hailed the development as a move that will increase the city's ability to borrow at favourable interest rates and lure investment.
"To me, it's a confirmation that the city is doing things right in terms of managing its finances. It will go a long way towards resolving issues of exhausting valuable credit capacity with individual banks."
Ngobeni expressed confidence that with the new rating, potential investors will look at the city more favourably.
He added that the rating augurs well for the city to consider introducing municipal bonds in future. "At the moment, the city borrows money from a few financial institutions. By issuing bonds, we will be expanding our borrowing base," Ngobeni said. The city has not taken any decision on issuing bonds, but the item features prominently in the agenda of the city, Ngobeni said.
