Rating agency Moody’s has put several of the City of Johannesburg’s credit ratings on review for downgrade amid concerns of weaker governance in South Africa’s key economic hub.
The firm confirmed its latest move in a statement on Friday. It includes a review of the city’s long-term issuer rating of Ba3 and its senior unsecured rating of Ba3.
Possible downgrade
Johannesburg’s Baseline Credit Assessment (BCA) of Ba3 has also been placed on review for possible downgrade. Previously, the outlook was stable. Its short-term issuer rating of Not Prime (NP) was affirmed.
The rating action follows the suspension by the Johannesburg Stock Exchange (JSE) of the city’s debt instruments from trading on the exchange due to a delay in the publishing of its financial statements for the year ended 30 June 2025.
The decision last month essentially locked the country’s most critical metro out of the debt market.
“The suspension does not in itself constitute a default under the debt instruments; however, it reduces tradability and liquidity of the city’s outstanding securities and disrupts the access to the local capital market,” says the agency headquartered in New York.
“We view this as a deterioration in our assessment of Johannesburg’s governance, particularly for transparency and timeliness of reporting.”
Steps Moody’s will follow
During the review period, Moody’s says it will:
- Assess the subsequent actions of Johannesburg and the JSE to address the “delinquent financial statements”;
- Review Johannesburg’s ease of access to financing and capacity to meet its upcoming financial obligations; and
- Review Johannesburg’s governance capacity with respect to timeliness and transparency of financial information.
Despite the suspension on the JSE, the city continues to service its debt and no acceleration or covenant breach has been disclosed.
However, reduced market access can increase refinancing and liquidity risk by limiting the city’s ability to raise new debt or refinance maturities on predictable terms, particularly in a stress scenario.
Johannesburg in trouble
Johannesburg’s low liquidity (6.4% of operating revenue as at 30 June 2025) provides a very thin cushion should market access be interrupted.
“Even if market access is restored, the episode could weigh on investor sentiment and risk premia,” the firm warns.
Joburg officials previously confirmed that the annual reporting documents are expected to be tabled and submitted to the JSE by no later than 31 May 2026.
This article was republished from Moneyweb. Read the original here.
