Mboweni says PIC will throw another life-line to Eskom

South Africa’s state-owned power utility is drowning in debt. Eskom has been plagued by corruption, bad management and failing infrastructure. The power utility has been struggling to provide adequate electricity for more than a decade and regularly enforces ‘load shedding’, costing the country vast sums in lost productivity. The SOE has close to R500bn  in debt and the hole has got deeper. Finance Minister,Tito Mboweni recently announced that the Public Investment Corporation (PIC) will throw a life-line to Eskom. He added that the PIC already holds most of Eskom’s bonds. Eskom has swallowed R188bn in debt relief that hasn’t touched sides. – Melani Nathan

S. Africa’s Mboweni says PIC willing to help Eskom resolve debt

By Manus Cranny and Gemma Gatticchi

(Bloomberg) — The Public Investment Corporation, Africa’s biggest fund manager, is willing to help South African power utility Eskom Holdings resolve its debt crisis, Finance Minister Tito Mboweni said at the Bloomberg Capital Markets Focus virtual event.

“Most of the bonds actually are held by the PIC and the banks and so on,” Mboweni said. “Eskom treasury is working on this matter together with National Treasury of South Africa, to make sure we smooth out the bonds as they mature.”

Eskom’s debt had ballooned to R488bn ($31.8bn) by the end of March, almost 11% more than it owed a year earlier. The utility’s finances have deteriorated despite the government having given it R188bn in grants and loans over the past decade.“The key issue in South Africa is that Eskom must manage their business, they must manage their income stream and their borrowing program because all of us need Eskom to be successful,” he said.

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Mboweni also said:

  • The country must adjust its expenditure patterns and ensure the debt-to-gross domestic product ratio doesn’t reach the 100% level.
  • There are “green shoots” of a recovery in the economy, particularly in mining and manufacturing.
  • He hopes an agreement can be reached with labor unions to freeze civil servants’ wages for the next three years.
  • Any public-sector wage deal must be within the confines of a prudent fiscal framework.
  • The government is edging closer to an understanding with the World Bank about securing a loan, but won’t accept that any conditions be attached to it.
  • South Africa seeks a rebound in economic growth to 3.3% in 2021
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