The City of Johannesburg (CoJ) has welcomed the decision by Moody's Ratings to affirm the city's long-term issuer rating at Ba3, while revising the outlook to positive, following the conclusion of its review.

The city, in a media release, says the rating affirmation and positive outlook represent an important vote of confidence in the city's financial resilience, its ability to meet its debt obligations and the strength of Johannesburg's economic fundamentals despite a challenging operating environment.

The CoJ says its successful restoration of compliance with the JSE debt listings requirements, following the publication of its audited annual financial statements, resulted in the lifting of the suspension of its debt instruments and removed any potential risk associated with debt acceleration.

Throughout this period, the city says, it demonstrated sound financial management, sufficient liquidity to service its obligations and an unwavering commitment to investors and financial markets.

Moody's recognised several key strengths underpinning the city's credit profile, including a resilient and diversified metropolitan economy that contributes about 15% of South Africa's GDP; stable operating performance supported by improved electricity sales and prudent financial management; a moderate and sustainable debt profile; continued access to capital funding and government grants to support infrastructure investment; and consistent servicing of all debt obligations, even during the temporary JSE suspension.

Importantly, Moody's has assigned a positive outlook, reflecting confidence in Johannesburg's resilient standalone credit profile and expectations of an improving sovereign operating environment.

The city says this outlook creates an opportunity for future rating improvements, provided the city continues strengthening governance, financial management and institutional performance.

The CoJ acknowledges Moody's observations regarding governance and financial reporting delays.

“These findings have been accepted with the seriousness they deserve and corrective measures are already being implemented to strengthen financial governance, improve internal controls, enhance budget monitoring and ensure continued compliance with all statutory and regulatory reporting requirements,” it says.

The city says it remains committed to embedding a culture of accountability, transparency and sound governance across the administration, adding that the unqualified audit opinion for the 2024/25 financial year provides an important platform from which these improvements will continue.

City manager Dr Floyd Brink welcomed the outcome by saying that the affirmation of the city's credit rating, together with a positive outlook, is an encouraging endorsement of Johannesburg's financial resilience and economic strength.

“While we recognise that governance improvements remain a priority, this outcome confirms that the city is financially stable, honours its commitments and is implementing reforms to strengthen investor confidence and improve service delivery. We remain focused on enhancing governance, investing in infrastructure, and creating an environment that supports economic growth and job creation," says Brink.

Moody’s emphasised that it could consider upgrading the ratings if the city demonstrates consistently improving governance in terms of budgeting and monitoring, eliminating the findings in the auditor statements.

CoJ CFO Tebogo Moraka says the city will remain focused on strengthening its financial management and governance to ensure long-term sustainability, with the ultimate goal of securing future credit rating upgrades from key institutions such as Moody's.

“The city views this rating action as an important milestone in restoring market confidence and reaffirming Johannesburg's position as South Africa's economic engine.

“The administration will continue implementing reforms that improve governance, strengthen financial sustainability and support long-term infrastructure investment for the benefit of residents, businesses and investors,” says the CoJ.

News reports in recent weeks suggested that the city was facing severe financial headwinds, with newswire Bloomberg having reported just last week that the city is facing an unfunded budget gap of about R2.1-billion for the current financial year, which started on July 1.

The city’s failure to honour its payment obligations to national power utility Eskom have also made headlines in recent months.