December 7, 2004
By Thomas Thale
THE City of Johannesburg has successfully reduced the cost of its debts by issuing bonds at a cheaper rate, thus improving its liquidity.
This was said by City Treasurer, Jason Ngobeni, at an international conference organised by the Cities Alliance in Hanoi, Vietnam and sponsored by the World Bank and the governments of Japan, Germany and the United Kingdom.
"This means that we are managing our long-tem liquidity well," said Ngobeni, who has just been given an award for being "the most influential employee in the City".
The Cities Alliance was set up by the United Nations and the World Bank as a global alliance of cities committed to sharing information on removing urban slums and improving the living conditions of the urban poor.
The conference brought together experts from various cities to exchange ideas on strategies to expedite urban development, boost economic growth, create employment, reduce poverty and raise municipal finance.
In his address, Ngobeni outlined the processes the City of Johannesburg followed in issuing its award winning bonds. The City issued two bonds in 2004, raising a total of R2-billion. The first R1-billion unsecured bond was given a "bond of the year award" by the Bond Exchange of South Africa (BESA).
According to Ngobeni, the City entered into onerous debt arrangements in the late 1990s, at a time when it was experiencing financial distress. But, he added, the City had fully recovered from the financial woes it faced in 1997.
To raise funds to meet its infrastructural backlog, Johannesburg had to explore alternative, more cost-effective ways of raising capital. Ngobeni ascribed the City's improved fortunes to fiscal discipline, which has seen its credit rating moving from BBB+ in 1990 to its current A.
Ngobeni said part of the proceeds from the bond would be used to refinance its inherited debts, while the rest would be used to meet its capital expenditure.
Early next year, Ngobeni will be a keynote speaker at the "Bonds World Africa 2005" Conference to be held at the Sandton Convention Centre. He will share the platform with Tom Lawless, CEO of BESA, and Chris Golden, Chairman of the European Bond Commission.
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