{"id":12861,"date":"2012-07-27T13:40:20","date_gmt":"2012-07-27T11:40:20","guid":{"rendered":"http:\/\/www.myza.co.za\/07\/text-fitch-affirms-johannesburg-at-bbboutlook-stable\/"},"modified":"2012-07-27T13:40:20","modified_gmt":"2012-07-27T11:40:20","slug":"text-fitch-affirms-johannesburg-at-bbboutlook-stable","status":"publish","type":"post","link":"https:\/\/www.myza.co.za\/press\/text-fitch-affirms-johannesburg-at-bbboutlook-stable\/","title":{"rendered":"TEXT-Fitch affirms Johannesburg at ‘BBB+’;outlook stable"},"content":{"rendered":"

\t\t<\/span><\/p>\n

(The following statement was released by the rating agency)<\/span><\/p>\n

<\/span><\/p>\n

July 26 – Fitch Ratings has affirmed the South African
\nMetropolitan Municipality of Johannesburg’s (CoJ) Long-term local currency
\nrating at ‘BBB+’, National Long-term rating at ‘AA-(zaf)’ and National
\nShort-term rating at ‘F1+(zaf)’. The Outlooks on the Long-term ratings are
\nStable.<\/p>\n

<\/span><\/p>\n

The affirmation reflects CoJ’s continued improvement in its liquidity and
\nworking capital as well as its modestly rising borrowing, which has nonetheless
\nstabilised financial debt below 50% of revenues and about five years of the
\ncurrent balance. The ratings also take into account the weak socio-economic
\nindicators by international standards.<\/p>\n

<\/span><\/p>\n

Failure to re-strengthen tax and fee collection rates towards the 95% level of
\npast years, which may help contain the growth of receivables and payables by
\nFY15 to about ZAR9bn and ZAR10bn, respectively, could lead to a downgrade.
\nConversely an operating margin growing to 15% from the current 11% in a context
\nof stronger debt sustainability as indicated by a debt to current balance below
\nfive years could lead to an upgrade if macroeconomic conditions, as encapsulated
\ninto the Negative Outlook for the South African Republic, improve.<\/p>\n

<\/span><\/p>\n

Budgetary surpluses in FY11 and FY12 drove Johannesburg’s cash reserves towards
\nZAR2bn in June 2012, up from ZAR300m in June 2010. Fitch believes that
\nimprovement in the average tax and fee collection rate to around 95% over the
\nmedium term from 90% in FY12 will be conducive to bolstering cash reserves
\naround ZAR3-4bn, as opposed to the city’s expectations of ZAR6.5bn by 2015.
\nStronger liquidity would also help overcome the city’s working balance deficit,
\nalthough the level of receivables remains a concern.<\/p>\n

<\/span><\/p>\n

Economic growth, which Fitch expects to be about 4% per year over the medium
\nterm, appears too soft to reduce the 25% unemployment rate, far exceeding
\ninternational peers. The city may therefore find it challenging to continue
\npassing ever growing water and energy bills on consumers, and enforcing tax
\ncompliance to improve collection rates. The slowdown in economic growth from
\n6%-7% in previous years could result in further delays in receipts, raising
\nreceivables, net of provisions, beyond Fitch’s central scenario of about ZAR9bn
\nby 2015. The city has budgeted for ZAR8.5bn receivables by 2015, up from ZAR6bn
\nin FY2011 and for a stabilization of trade and other payables at about ZAR8.5bn
\nover the same horizon.<\/p>\n

<\/span><\/p>\n

Fitch’s base case scenario envisages an operating margin stabilising at about
\n11%-12% over the medium term as the need to expand basic service delivery to the
\ngrowing population may pressure operating spending and constrain the margin from
\nrising towards the 15% budgeted by the city by 2015. However, investment
\nflexibility should avoid an overshooting of deficit spending as some of the
\nprojects may be deferred.<\/p>\n

<\/span><\/p>\n

Part of the investment stems from the need to accommodate the expected impact of
\nthe climatic changes. With Johannesburg becoming more prone to rain and subject
\nto floods than in the past, early preparations may help spare the city from
\ntotally unanticipated capital spending. As the city prepares its ZAR100bn plan
\nover the next decade, capital spending will rebound towards ZAR7bn in 2015 from
\nZAR3.7bn in 2012, focussing on projects such as electricity, water,
\ntransportation and housing to accommodate its growing population.<\/p>\n

<\/span><\/p>\n

Resumption in investment will turn the budget from a small surplus – as per
\nFitch’s adjusted data on an international standard basis – to a deficit of about
\nZAR1bn or 2%-3% of revenues around FY15, with borrowing limited to about 20% of
\nannual investments.
\n\u00a0 Continued…<\/strong><\/span><\/p>\n

<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

(The following statement was released by the rating agency) July 26 – Fitch Ratings has affirmed the South African Metropolitan Municipality of Johannesburg’s (CoJ) Long-term local currency rating at ‘BBB+’, National Long-term rating at ‘AA-(zaf)’ and National Short-term rating at ‘F1+(zaf)’. The Outlooks on the Long-term ratings are Stable. The affirmation reflects CoJ’s continued improvement […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","ngg_post_thumbnail":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[830,2370,183],"class_list":{"0":"post-12861","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-south-africa","7":"tag-news","8":"tag-reuters","9":"tag-south-africa-2","10":"entry"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/12861","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/comments?post=12861"}],"version-history":[{"count":0,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/12861\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/media?parent=12861"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/categories?post=12861"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/tags?post=12861"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}