Fitch upgrades Johannesburg, rates bond A+(zaf)

Fitch Ratings said it upgraded the City of Johannesburg Metropolitan Municipality's long-term national rating to A+(zaf) from A(zaf), upgraded the long-term rating of its 1 billion South African rand partial guaranteed (40%) 12-year bond to AA+(zaf) from AA (zaf), assigned an expected A+(zaf) long-term rating to the city's upcoming 1 billion rand senior unsecured bond issue and affirmed the short-term rating at F1(zaf).

The outlook is stable.

The agency said the upgrade reflects Johannesburg's strengthening operating performance, driven by higher tax collection rates and a growing economy, and the clean-up and updating of the asset register, which resulted in more assets on the balance sheet and higher provisions for depreciation, which in turn help to self-finance investment spending.

The ratings also consider long-term challenges such as income inequalities and low labor participation, which tend to limit tax generation while requiring subsidies, Fitch said.

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