City of Johannesburg Investor Road Show January/February 2011 - - PowerPoint PPT Presentation

City of Johannesburg Investor Road Show

January/February 2011

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Contents

 Road Show team  Overview of the City  Political Overview  Financial Overview  Revenue Performance  Funding Strategy  Bond Offering

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Road Show Team

Issuer – City of Johannesburg Metropolitan Municipality Parks Tau MMC Finance: City of Joburg ParksT@joburg.org.za 011 358 3662 Mavela Dlamini City Manager: City of Joburg Citymanager@Joburg.org.za 011 407 7309 Mankodi Moitse Group CFO and Executive Director Finance: City of Joburg MankodiM@joburg.org.za 011 358 3619 Khomotso Letsatsi Director Treasury : City of Joburg Khomotsomap@joburg.org.za 011 242 1043 Mabandla Sibisi Acting Head of Dealing : City of Joburg Mabandlas@joburg.org.za 011242 1059 Lead Manager – Standard Bank and Basis Points Capital Zoya Sisulu Debt Capital Markets - Standard Bank zoya.sisulu@standardbank.co.za 011 378 7032 Khulu Montshiwagae Head Treasury- Basis Points Capital khulu@bpscapital.co.za 011 783 6169

Overview of the City of Johannesburg

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Overview of the City

Key Facts

Land Area The City Stretches over 1,664km2 Population 3,8 million people Households 1,3milliom % of Provincial Population 37% % of National Population 7% % of National GDP Contribution of about 16% Contribution to National employment The City contributes approximately 15% of employment Key Sectors Finance, Business Services and Construction

• The City Of Joburg was established in December 2000, it was the results of a merger of the Greater Johannesburg Metropolitan Council and

its substructures namely the Northern, Eastern, Western and Southern Metropolitan Local Councils as well as Midrand and Modderfontein

• The City is the most populous of South Africa’s nine metropolitan municipalities and remains the financial hub of the country
• Johannesburg is a powerful commercial centre on the African continent with world class facilities including: telecommunications, electricity,

broadcasting, clean water, Transportation infrastructure, health care, accommodation, office buildings, conference centres and recreational facilities

The City has set its sights on becoming a World-Class African city in which all residents can enjoy the fruits of economic growth and job creation and lead prosperous and healthy lives

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Governance Structure

• The City is one of two municipalities to pilot a new governance model allowing the City to refine , amongst others, the roles of the executive ,

council and administrative heads, level of decision making, accountability, institutional structures and the oversight of municipal entities by the respective core departments.

• The key role of Council in the new structure is to focus on legislative, participatory and oversight roles. Council delegates its executive function

to the Executive Mayor and the Mayoral Committee

• Council’s principal role is that of law maker, to debate issues publically and to facilitate political debate and discussion
• Section 79 oversight committees have been constituted and are chaired by non-executive Councillors
• The portfolio committee’s primary responsibility is oversight of the executive arm of the City’s governance and to monitor the delivery and
• utputs of the executive

Source: City of Johannesburg Annual Report 2000/9 Legislature Speaker Chairman of Committees Chief Whip Whips IFP Portfolio Committees Standing Committees Community Development Council Transportation Economic Development Health Dev Planning and Urban Management Public Safety Housing Infrastructure Development Finance Economic & Corporate Shared Services Rules Petitions & Public Participation Ethics/Disciplinary Standing Committee

• n Public Accounts

Programming PAC CDP UDM ANC OKM CF AZAPO FF PLUS

Independent

ACDP DA ID

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Growth & Development Strategy Package

Analysis Econ Dev Human Dev Housing Infrastructre Environment Spatial Dev Transport Health Safety Finance Governance

Corp service

Proactive absorption of the poor Balanced & shared growth Facilitated social mobility Settlement restructuring Sustainability & environmental justice Innovative governance solutions

6 principles cut across to inform analysis, vision and strategic choices organised in 12 Sector Areas

• 1. Long-Term Goals
• 2. Long Term Strategic Interventions

bridging into …

• 3. Five-Year IDP Objectives

4 Five-Year IDP Programmes

The GDS package …

Vision

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City Priorities – 2006 to 2011



The City’s vision is an expression of Johannesburg’s continued role as a wealth leader and opportunity creator – a role it has played for more than a century. But it also emphasises the need to transform Johannesburg from a city where only a few enjoy the fruits of propsperity, while the majority continue to struggle



The city’s vision will be driven by the following six core development principles Core development principles

1. Proactive absorption of the poor

• The need of the poor must be prioritised and therefore will facilitate the transition of the

poor, identified as new households , new internal and circular migrants, those in hostels, informal settlements and historical ghettoes, youth and refugees

2. Balanced and shared growth

• The City will continue to keep the cost of doing business as low as possible, but will also

aim to ensure that the benefits of growth are shared more broadly

3. Facilitated social mobility and equality

• Crucial to the City’s development that people are assisted out of poverty through shared

growth and other measures

4. Settlement restructuring

• Includes bringing jobs closer to people and people closer to jobs

5. Sustainability and environmental justice

• To become a more sustainable city buy anticipating and managing the effects of

environmental change. Its means promoting environmental justice , as well as ensuring that quality of life is enhanced , by extending green infrastructure to areas that have historically functioned as grey and featureless dormitory

6. Innovative governance solutions

• The City recognises that the development challenges cannot be met alone. The City of

Johannesburg is committed to finding joint solutions to these challenges by working closely with citizens, communities, business, all spheres of government and interested stakeholders

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Revenue Management



The City embarked on a aggressive credit control campaign



Approximately 30,000 accounts were subjected to the credit control



Of that 15,000 made arrangements to pay or paid in full

Challenge Expected Action

Deeds transfers not updated on the billing system Investigate and correct the interface between LIS and the billing system. Ensure updating of +- 10 000 records not on the billing system. Manage exceptions from the error report from SAP Adhoc confirmed address changes by LIS Finalise and test the interface Update physical and stand numbers changes confirmed. Incorrect stand and physical addresses on the billing system Extract of customers of accounts with the same addresses Correct incorrect addresses Exorbitant billing amounts Put controls not to release incorrect bills Take disciplinary action for releasing incorrect bills

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Challenge Expected Action

Implausible and outsorts Timely releasing of implausible and outsorts within 5 days Estimated meters -Inaccessible Move water meters on the boundaries Convert inaccessible electricity meters to prepaid Estimated meters (Faulty) Replacement of meters Investigate and correct the interfaces between MOE and R & CRM Wrongly printed statements Correct the ageing on the statements Correct the consumption on the statements Cancel the workflow for adjustment approvals. Ensure proper control on adjustment capturing

Revenue Management

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Revenue Management

Challenge Expected Action

Printing errors Clear the workbench errors Billing & invoicing logs Clear and resolve the logs Incorrect CCMS disconnections amounts Investigate and correct the differences between CCMS and Billing system Incorrect cut offs Investigate updates of accounts loaded for disconnection Develop business rules to validate accounts before sent for disconnection e-Services not working Post all statements through Post Office Incorrect Inner-City property zoning Investigate and update zoning Prepaid Meters not showing/marked Investigate and update prepaid found

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Operational Highlights

• 16,000 housing opportunities created
• Eradicated 17 informal settlements, 3

layout plans approved and formalised 3 informal settlements

• More than 18,000 title deeds lodged

to promote secondary property market

• Implementation
• f

programmes focused on education, prevention, ARV treatment, capacity development and wellness

• Following the successful launch of

phase 1A in September 2009 there has been a 52% increase in traffic

• numbers. Phase 1A 143 buses
• ECA drawdown of $42 million on

27 Dec 2010

• Implementation of Phase 1B included

the 23km bus lane, 33 bus stations and 125 buses in operation

• Exceeded targets for the increased

provision of basic services

• Electrification of more than 5,000

household unit in formalised areas

• Daily

cleaning

• f

119 informal settlements

• Provision of free basic services to all

indigent households

• To assist poverty stricken households

and individuals – more than 570,000 beneficiaries registered

• Provide support with education, skills

development and food supply, improving access to social grants, rehabilitation

• f

homeless and displaced persons and the placement

• f job seekers
• 10kl free water to 188,000 indigent

households

• 6kl free water to all households
• Free basic electricity provided to

73,139 households in area supplied through City Power

Provision of Basic Services and Demand Side Management Measuring poverty and the revised social package Provision of Free Basic Services Creation of Housing Opportunities HIV and AIDS awareness and support Rea Vaya Bus Rapid Transit

• Upgrading of the CBD and retail

improvement

• Investment of R1.6 bln through the

Urban Development Zone

• Increased participation of SAPS in

strategic forums and crime prevention operations

• Targeted enforcement operations to

reduce crime incidents

• Joint operations between JMPD,

SAPS and other agencies resulted in 38,000 arrests for priority crimes

• Fully operation CCTV Control Centre

in the Inner City with 231 surveillance cameras, 6 patrol vehicles and 200 foot patrollers

• 203,403 trees planted
• 2 Soweto Nurseries development

completed

• Memorial

Tree Programme introduced in 2008, 38,000 memorial trees planted to date

• More

than 200,000 beneficiaries reached through the tree education and awareness programme

Inner City Regeneration Crime Prevention Strategy Greening of the City

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Risks and Challenges

The City has identified the following risks and challenges:

Risk Details

Economic environment

• Global recession impacted resident’s ability to pay resulting in increased use of legal

interventions for debt collection

• Financial sustainability addressed through the development and implementation of Financial

Strategy

Unemployment trends

• The City is addressing unemployment through the Joburg 2030 process as well as the Extended

Public Works Programme and especially by supporting labour intensive sectors. EPWP job creation targets of 120 000 we met with 153 834 jobs mainly contributed by construction sectors. Drive for other sectors to contribute is underway.

Housing demand

• Targeted housing delivery of 100 000 by 2011. 69 000 houses were delivered by 2009/10 and

11 000 will be delivered by 2010/11. Shortfall on housing delivery 20 000. Severely impacted by budgetary constraints, economic conditions and liquidity constraints in the banking sector

Infrastructure upgrades

• Electricity losses are approximately 13%, exceeding 5-year target of 12 mainly due to cable theft

and illegal connections

• Water losses increased from 31.4% in 2006/07 to 37.4% in 2009/10 against target of 30%, due to

lack of prepaid meters and suspension Gcin” amanzi

• Increasing demand for maintenance in roads & storm water infrastructure

Culture of non-payment

• Encouraging culture of timely payment , increasing accessibility of pay channels and customer

channels

• Programme Phakama to manage City’s revenue value chain from a single platform

Health

• Improve accessibility of health care and intensify fight against HIV/AIDS through implementation
• f programmes and better co ordination with other spheres of governments

Public Safety

• Increased co-operation with counterparts in the province and SAPS aimed at reducing crime
• Focused crime prevention programmes and addressing the social and urban environmental

factors that create opportunities for the perpetration of crime

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City of Joburg: The big issues 2011

• 1. The trading services: Revenue enhancement and protection

– The ESKOM tariff juggernaut – Electricity Supply grid: Elimination of power outages – Service Demand Management

• 2. Economic investment
• 3. Green city plan: Global warming and impact
• 4. Transportation:

– Public transportation investment – Congestion Management & reducing the cost of business

• 5. Clean City Waste removal 24/7 (Environmental Management)
• 6. Revenue collection and Financial prudence

– Customer relations enhancement

• 7. Development Planning

– Turn around of development planning processes

• 8. Inner city Urban Regeneration & Management and housing
• 9. Public Safety: Law, Bylaw enforcement and Policing function

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Electricity IDP Plan

1.

Load management interventions: Intake stations

2.

Electrification in high demand /growth areas

3.

Side Management (DSM) program

• Customer education program
• Alternative energy sources
• Advanced metering solutions

4.

Electricity supply in developments approved as per IDP

• Reduction of power outages (systems failure)
• Installation of universal public lighting
• Reduction of Non Technical Losses
• Controlled Provision of prepaid meters
• Provision of adequate electricity capacity

5.

Services Backlog elimination

Political Overview

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Local Government Elections



The term of office of current municipal Councils commenced

• n 01 March 2006 and ends on 02 March 2011



Elections should be held within 90 days after expiry of the last election, in this instance the 90 day period starts from 02 March 2011 and ends on 30 May 2011



The Minister of Local Government, after consulting the IEC will, by Notice in the Government Gazette, call and set a date for an election of all municipal councils



2011 Municipal Elections will take place in 8 Metropolitan Councils, 226 local Councils, 44 District Councils and 4277 wards



Voter Registration is Scheduled for 5 and 6 February

Election process



The re-determination of municipal boundaries and the delimitation of wards by the Municipal Demarcation Board resulted in structural change in a number of municipalities and Wards



A total of 278 municipal councils will be contested in 2011 municipal elections. It is a reduction of 5 municipalities from current number

• f

283 municipalities



The Number of wards according to MDB has increased from 3895 to 4277

Local Government Landscape Post 2011 Municipal Elections

17 Option 1: Outgoing council approves 2011/12 budget Option 2: Outgoing council prepares 2011/12 budget, new council approves it

• 1. Current Mayor prepares a budget schedule that brings the review of the

IDP and the tabling of the budget forward to late February or the beginning of March 2011

• 2. Community consultations on the annual budget conducted in remainder of

March and early April 2011

• 3. Officials complete technical work on annual budget by mid-April 2011
• 4. Current council approves annual budget before the end of April 2011
• 5. New council implements annual budget from 1 July 2011
• 1. Current mayor prepares a budget schedule that brings the review of the

IDP and the tabling of the budget forward to early March 2011

• 2. Community consultations conducted in remainder of March and early

April 2011

• 3. Officials complete technical work on budget during May and ensure that it

is ready to be placed before council for approval by 1 June 2011

• 4. New council must consider budget as their first order of business, after

electing the Mayor – and approve it before the start of the new financial year – 30 June 2011

Benefits of Option

• Minimises risk of there not being an approved budget at the start of the

financial year

• Ensures continuity
• Safeguards the financial sustainability of the municipality by ensuring tariff

increases are locked in before the start of the financial year

• Allows new council to approve and ‘take ownership’ of the annual budget

Risks of Option

• New council may not be happy with the priorities set out in the annual

budget approved by the outgoing council, and so be reluctant to be held accountable for its implementation

• There is real risk that the municipal council may not be constituted, or may

not get itself organised in time to approve the budget before the start of the municipal financial year, which will put the financial sustainability of the municipality at risk

• New council may seek to introduce last minute changes to the tabled

budget which will tend to undermine the integrity of the community consultation processes

Local Government Elections – Budget Process

• All district councils are strongly advised to adopt option 1. National Treasury also recommends this option for metros and local

councils, unless specific political circumstances suggest that it is important to allow the new council to approve the budget.

• where specific local political circumstances suggest that it is important to allow the new council to approve the budget.

Financial Overview

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Financial Turnaround Strategy - Phases

Stabilisation Consolidation Sustainability

(1-2 years) (2-3 years) (>3 years)

Improve Liquidity levels − Citywide VAT review process −Sale of non-strategic property −Servicing old commitments on servitudes, land sales −Outdoor advertising Implement revenue maximization initiative − Improve collection −Billing maximizations −Data clean up −Operational efficiencies −SAP Implementation (Phakama) Managerial and institutional interventions − Establish institutional behavioural change through systematic implementation of expenditure review outcomes −Conduct an institutional review to assess capacity requirements Sustainable development and service delivery − City wide roll out automatic meter reading and prepaid meters Pursue alternative revenue sources in line with increasing service delivery demands Cap spiralling expenditure − Strengthen City’s voice in intergovernmental debates especially regarding major costs −Slow down discretionary operating expenditure Comprehensive infrastructure plan − Creation of an asset replacement reserve to ensure City assets are not stripped of useful value −Roll out the implementation of Infrastructure Maintenance Plans, linked to the Comprehensive Infrastructure Plan Capital budget management − Find a balance between continued service delivery and management of debt to revenue ratio −Pursue alternative sources of funding −Maintain consistent levels of expenditure per household −Maintain a balance between Investment in productive economic infrastructure, basic needs and social facilities

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Financial Turnaround Strategy - Progress

Stabilization Phase Key Deliverable Intervention Progress Improve Liquidity levels

Citywide VAT review process

• Service provider has been appointed and work is underway. Completion expected

in April 2011 Sale of non-strategic property

• Procurement processes in progress

Servicing old commitments on servitudes, land sales

• Land parcels identified awaiting expression of interest
• Funds expected to flow by June 2011

Outdoor advertising

• Negotiations underway for new revenue packages for different advertisers. Up

front payments expected by June 2011

Implement revenue maximization initiative

Improve collection

• Maintained collection levels in the face of recessionary environment. Collection

level of 92.6% achieved in 2010 compared to 91.1% in 2009 Billing maximizations and Operational efficiencies

• Billing project team appointed in July 2010 to address all billing matters following

Migration to SAP ensuring improved efficiencies across the revenue value chain Data clean up

• Ongoing process

SAP Implementation (Phakama)

• All databases successfully migrated to SAP by June 2010
• System has inbuilt error checks and save guards which have impacted timing of

billing

Cap spiralling expenditure

Strengthen City’s voice in intergovernmental debates especially regarding major costs

• City participation in forums such as the Cities Budget forum and various other

debates e.g. engagements with NERSA on electricity tariffs, REDS debate (through IMFO) Slow down discretionary operating expenditure

• Expenditure review interventions resulted in overall reduction of proportion of City

expenditure spent on general expenses and consultants

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 The City illustrated a sound 24% growth in total revenue, mainly as a result of increased grants and subsidies for the Soccer

World Cup

 Expenditure growth of 13% is as a result of bulk purchases for water and electricity  Employee related costs remained well contained at 26% of operating expenditure

Financial Performance

Expenditure composition Revenue composition

Source: City of Johannesburg Group - Draft Annual Financial Statements for the Year Ended 30 June 2010

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Financial Performance

Source: City of Johannesburg Group - Draft Annual Financial Statements for the Year Ended 30 June 2010

Statement of financial performance for the period ended 30 June Budgeted statement of the financial performance for the period ended 30 June R’000 2007 Actual 2008 Actual 2009 Actual 2010 (Unaudited) 2011 Budget 2012 Budget 2013 Budget Total Revenue 15,884,175 17,959,812 20,491,790 25,153,400 26,308,874 29,261,396 32,779,602 Total Expenditure 14,289,388 16,005,490 19,724,684 22,151,687 25,164,848 28,086,212 31,596,679 Surplus / (Loss) 1,594,787 1,954,322 755,439 2,896,538 1,013,632 1,002,256 1,034,545

 Budget growth in the medium term is expected to slow down as the City “cools off” after a period of sustained high growth

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Financial Performance

Total assets vs. borrowings vs. cash equivalents

 Total assets grew by a moderate 7%, attributable to the capitalisation of some world cup related projects. 

In 2010, R4.6 billion was spent on capex.

 The City’s total interest-bearing liabilities increased by a conservative 7% from R10.4 billion in 2009 to R11.1 billion in 2010 as

a result of the efforts by the City to complete some of the capital projects in time for the Soccer World Cup 2010.

Source: City of Johannesburg Group - Draft Annual Financial Statements for the Year Ended 30 June 2010

Revenue Performance

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Annual Collection Rates

 2009/10 financial year provided revenue collection of the City with unprecedented settings including

– the turbulent global economic environment and – migration into the new system yet sustains the fundamentals of revenue collection.

 Revenue collection exceeded expectation with a citywide total collection of R16.5 billion at a percentage rate of 92.7%  This can be attributed to multiple interventions including revenue maximization efforts and management of the panel of collecting

attorneys to yield the desired output of increased revenue collection

 In 2010/2011, the City plans to increase revenue collection to a minimum of R18 billion which represents a 9% increase from the

previous year

Jun-10 Jun-09 Jun-08 Jun-07

Billing Actual Receipts Jun-10 Billing Actual Receipts Jun-09 Billing Actual Receipts Jun-08 Billing Actual Receipts Jun-07 R’000 R’000 % R’000 R’000 % R’000 R’000 % R’000 R’000 %

Revenue and CRM

• Total

10,240.444 9,086,234 88.7 9,125,336 7,747,292 84.9 8,164,882 7,470,684 91.5 7.515,075 6,835,358 91.0

City of Johannes burg - Total

17,945,447 16,618,908 92.6 15,313,217 13,951,573 91.1 12,907,769 12,173,338 94.3 11,846,397 11,161,955 94.2

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Billing and Collection (5 months ended 31 December 2010)

Description Actual 2 months ended August 10 Budget 2 months ended August 10 Variance Actual 3 months ended November 10 Budget 3 months ended November 10 Variance

Total Billing 3,036,146 4,004,576 (968,431) 6,571,672 5,346,916 1,224,756 Total Collections 2,783,981 3,775,191 (991,210) 5,385,500 5,015,260 370,240

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Service 0-30 days % 31-60 days % 61-90 days % Over 90 days % Total R’000 Rates 18.69% 4.83% 5.55% 70.9% 2,977,703.00 Electricity 26.62% 6.84% 4.28% 62.3% 2,076,035.00 Water 11.69% 4.36% 4.36% 79.6% 4,168,432.00 Refuse 6.26% 6.01% 5.58% 82.1% 563,836.00 Housing Rental 2.58% 1.52% 1.32% 94.6% 229,574.00 TOTAL 16% 5% 5% 74% 10,015,580.00

2010 Consumer Debtors Age Analysis by Service Type

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Debtors Age Analysis for Metros

Metro 0-30 days % 31-60 days % 61-90 days % Over 90 days % Total % Nelson Mandela Bay 49.7 6.9 1.4 42.1 5.5 Ekurhuleni Metro 14.5 5.7 3.2 76.7 24.4

City of Johannesburg 26.9 3.6 2.1 67.3 29.8

City of Tshwane 25.2 2.6 2.0 70.2 10.5 eThekwini 22.0 5.2 6.4 66.4 14.8 Cape Town 19.3 5.4 3.1 72.2 15.0 TOTAL 23.1 4.7 3.1 69.1 100 Debtors Age Analysis as at 1st quarter ended 30 September 2010

Source: National Treasury Local Government Database

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Debt Serviceability

 As anticipated, accelerated capital program has put pressure on prudential ratios  The City’s Financial Strategy aims to gradually reduce the debt to revenue to 46% in the medium term 2010 Unaudited 2009 2008 2011f 2012f 2013f Salaries to Opex 26% 26% 26% 26% 25% 24% Debt to Revenue 54% 54% 46% 50% 49% 47% Current Ratio 0.61 0.66 0.78 0.84 0.99 1.19 Interest to Opex 7% 6% 5% 5.7% 5.75 5.0%

Source: City of Johannesburg Group - Draft Annual Financial Statements for the Year Ended 30 June 2010

Funding

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Medium Term Capex Spend 2009/10 – 2012/13

Category Budget year 2009/2010 Budget year 2010/2011 Budget year 2011/2012 Budget year 2012/2013 Total (R millions) Loans/borrowings 1,992 1,512 1,512 2,300

7,316

Grants and donations 2,627 1,090 2,181 1,829

7,727

Internally generated funds 855 457 278 279

1,869

Total Capex 5,474 3,059 3,971 4,408

16,912

• The majority of the capital spend over the short to medium-term will be focused on improving City Power, Joburg Water and

transportation

• In terms of the approved medium-term budget, the City's total external borrowing requirements from 2009/10 to 2012/13 is

approximately R7,316billion

• Loans/borrowings form the bulk of funding for the 2009 /10financial year. To date a R 479mln facility has been arranged with

AFD (French Development Agency), the balance expected to be funded by the bond issue

• The level of capital expenditure will continue to be based on principles of affordability, prudential indicators and sustainability

and reassessed continuously

Source: City of Johannesburg Medium Term Budget 2010/11 – 2012/13

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Funding Strategy and Debt Structure

• Strategic focus to create a well governed and managed city
• External borrowing requirements of approximately R 3.95billion from 2009/10 to 2011/12
• The City will continue to seek innovative, cost effective and efficient funding mechanisms
• Maintain diversity in funding sources and closely manage the debt maturity profile

The following instruments are being considered: Long-term funding

• Debt Capital markets
• Development Finance Institutions
• Project finance and PPP
• Other project specific funding options e.g. ECAs
• Bilateral loans
• Bond switch

Short-term funding

• Commercial Paper
• General Banking Facilities

Long term liabilities

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Redemption Management

Municipal Bonds Outstanding Issue Date Maturity date Nominal R bln COJ02 30-Jun-04 15-Sep-16 1.00 COJ03 26 –Apr-05 26-Apr-13 0.70 COJ04 05-Jun-06 05-Jun-18 1.73 COJ05 05-Jun-08 05-Jun-23 2.27 COJ06 09-Dec-08 15-Dec-15 0.90 Total 6.60

Debt Maturity Profile

• The City has carefully managed the issuance of bonds and CP such

that the debt maturity profile is well spread ensuring the City is not under pressure when redemptions occur

• A bond sinking fund has been established to further assist with the

management of the City’s bond redemptions

• Currently a balance of R 1.475bln is available in the fund, following

the successful redemption of COJ01 (R 1bln) in April 2010

• CP redemptions are managed similarly with grant receipts being

ring fenced to facilitate redemptions

• In the current financial year R 1.017bln of CP has been redeemed
• Remaining grant and levy allocations of over R 2bln will be used to

redeem outstanding CP

Commercial Paper Outstanding Issue Date Maturity date Nominal R bln COJ04C* 8 - Jul -10 10 -Jan- 11 1.017 COJ05C 8 - Jul- 10 8 - Apr - 11 0.435 COJ06C 26-Aug-10 28-Feb-11 0.200 COJ07C 26-Aug-10 26-May-11 0.900 COJ08C 26-Aug-10 26 -May-11 0.148 COJ09C 15-Dec-10 17-May-11 0.702 Total 3.40 *Redeemed on 10 January 2011

Offering summary

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Credit Rating

Rationale:

 The deepest and most diversified local economy of all the cities in the country  Considered the business capital and main financial and economic centre of South Africa  Good fiscal flexibility embedded in the current institutional framework

Stable outlook based on:

 Expectation that the municipality will maintain a prudent financial policy  Although the debt burden will increase, it is expected to remain at a manageable level

Agency Description Long-term rating Short-term rating Outlook Fitch Issuer Rating AA- (zaf) F1+ (zaf) Stable Moody’s Issuer Rating Aa3.za P- 1.za Stable

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COJ Credit highlights

The City of Johannesburg was the first municipality to tap the South African Debt Markets. Since then COJ has been a pioneer in the capital market funding of municipalities having issued retail bonds and commercial paper. the following factors set the City apart as an issuer Importance to the Countries Economic Development

 As the largest municipality the City is of critical economic and strategic importance to South Africa  The City is a financial hub of the country and provides a vital gateway to the country and the African continent as a whole

Long Standing Reputation in the Debt Capital markets

 The City has developed a strong reputation as an issuer, having consistently tapped the market since its debut bond in 2004  Established an externally managed sinking fund to facilitate redemption of the City’s bonds  Successful redemption of COJ01 in April 2010, this was the first municipal bond issued in the market  COJ has highlighted the importance of the DCM to is long term funding strategy

Strong Financial Performance

 Strong Diverse economic base coupled with a strong tax base  Stable financial performance in recent years with signs of recovery following the 2008 crisis  Manageable debt burden and sound liquidity profile  Unqualified audit for 3 consecutive years

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Issuer City of Johannesburg Metropolitan Municipality Documentation Domestic Medium Term Note Programme Issuer Rating Aa3.za/AA-.za Offered Securities Senior unsecured notes Structure of Notes Fixed Rate Proposed Amount Up to ZAR [1.1] billion Tenor (Maturity) [10]/[15] years Companion / Benchmark Bond [●●] Coupon (Dates) Payable semi-annually in arrears Issue Date [●●] Settlement Date [●●] Listing JSE

Proposed Offering Summary

38 38

Think ahead. It wasn’t raining when Noah built the Ark

Engagement & Investor clarifications