GAUTENG's two main metropolitan councils, Johannesburg and Tshwane, have received a boost following improved credit ratings by different credit rating agencies at the weekend.
The improved ratings will allow the two metropolitan councils to borrow cheaply in the money market as they have sound finances.
International rating agency, Global Credit Ratings upgraded Tshwane's long and short-term ratings to A+ and A1-, from A and A2. Fitch Ratings upgraded Johannesburg's long-term rating from BBB+ to A-.
The long-term ratings indicate high credit quality, with good protection factors. Tshwane's shortterm rating indicates a high certainty of timely payment, with strong liquidity factors supported by good fundamental protection factors.
However, the rating was negatively affected by the increase in debts in the city, resulting in continued working capital absorptions and a weaker debt collection period. Debt accounted for R1,5bn in December.
The Tshwane metropolitan council has a population of about 2,2-million and accounts for approximately 9% of the country's total gross geographic product.
Senior analyst at Global Credit Rating Marc Joffe said Tshwane had managed to reduce its gearing over the past four years, while concomitantly increasing cash holdings.
Furthermore, the matching of all principal debt repayments with investments by way of sinking funds was viewed positively.
"Gearing levels are not expected to increase significantly over the medium-term as the council makes use of internal and grant funding for the majority of its (capital expenditure) requirements," he said.
Johannesburg's finance and economic development director, Roland Hunter, said: "This is confirmation of the financial prudence we have shown.
"Since 2000, the city has undergone a political and administrative transformation. Tight fiscal discipline, adherence to policy and a strong leadership directed by one vision of building a world class city are gradually paying off."
The city had steadily overcome its financial problems since near financial bankruptcy in the 1997-98 financial year. He said although short-term liquidity was not yet rerated, it was improving steadily.
Jul 07 2003 07:44:21:000AM Xolani Xundu Business Day 1st Edition
Publisher: Business Day
Source: Xolani Xundu
Gauteng's 'big two' improve credit ratings.
Posted On Monday, 07 July 2003 02:00 Published by eProperty News
GAUTENG's two main metropolitan councils, Johannesburg and Tshwane, have received a boost following improved credit ratings by different credit rating agencies at the weekend.
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