How the world sees SA, post-budget – The Wall Street Journal

CAPE TOWN — Hands-on oversight, zero tolerance for wastage and crony tendering and non-negotiable deadlines must surely be the by-words for the new Eskom management – if their generous budget bail-out is to pay-off. Hopefully the financial 'sieve' which Finance Minister Tito Mboweni refers to has been sufficiently patched over to enable the new money to infuse new life into the ailing power utility and give it the required breathing space to begin recovering. Here's a summary of the kind of perspective that is shared by interested observers beyond our shores – many of whom will be delighted by the cost cuts, especially to the bloated civil service. That the Eskom crisis is being prioritised is crystal clear from Mboweni's budget, another sign that the soil being turned and enriched, with new seeds planted is a dramatic departure from the sick practices of the recent past. – Chris Bateman.South Africa Bails Out Scandal-Struck Power Company.By Simthandile Ntobela and Gabriele Steinhauser ___STEADY_PAYWALL___.(The Wall Street Journal) PRETORIA, South Africa – The South African government announced a $5bn bailout of its troubled power utility Wednesday as part of a tough national budget less than three months ahead of elections.President Cyril Ramaphosa needs to shore up Eskom, but is also under pressure from international investors and credit-ratings firms, which are threatening to further downgrade South Africa's sovereign debt.The budget is critical for Mr. Ramaphosa, who is waging a hard-fought campaign to be elected for a full term in May.State-owned Eskom, which supplies more than 90% of electricity used in Africa's most developed economy, is saddled with more than R420bn ($30bn) in debt and warned last week that it would go bankrupt by April without a government bailout. Failures at its ageing power stations and technical problems at newer plants have led to debilitating blackouts across South Africa in recent weeks, leaving residents and businesses without electricity for up to nine hours a day.Presenting his final budget ahead of the May vote, Finance Minister Tito Mboweni told Parliament that the new aid for Eskom would come with strict conditions, including the installation of a "chief reorganisation officer," who would oversee a three-way split of the company, separating generation, transmission and distribution."Pouring money directly into Eskom in its current form is like pouring water into a sieve," Mr. Mboweni said.With his budget, Mr. Mboweni, a former central-bank governor, had to strike a delicate balance: The government can't risk big cuts to spending or large-scale job cuts at state-owned companies ahead of elections on May 8.However, inflating its deficit and debt through costly bailouts could trigger another ratings downgrade for South Africa's debt, which is already considered "junk" by S&P Global Ratings and Fitch Ratings.Moody's Investors Service said earlier in February that it would review its investment-grade rating of South African bonds if Eskom was rescued without a clear restructuring plan.In addition to the bailout for Eskom, which will be distributed over three years, Mr. Mboweni said he has set aside 13 billion rand for the fiscal year starting April 1 to support other state-owned enterprises, including flag carrier South African Airways.To make up for the extra spending of state companies, Mr. Mboweni said he would seek to cut the cost of the government payroll, including the early retirement of civil servants and diplomats. In a small nod to the upcoming elections, the finance minister announced an 80-rand increase to monthly pensions, as well as infrastructure improvements at schools, including refurbishing pit toilets that have led to several deadly accidents in recent years.The government's deficit is now expected to reach 4.2% of gross domestic product for the fiscal year ending March 31, up from 4% projected in October, and rise to 4.5% in 2020-21.Mr. Ramaphosa, who ousted his scandal-battered predecessor Jacob Zuma a year ago, has struggled to revive South Africa's hamstrung economy, which grew a mere 0.7% in 2018. Gross domestic product is expected to rise 1.5% this year, 1.7% in 2020 and 2.1% in 2021.Write to Gabriele Steinhauser at gabriele.steinhauser@wsj.com

How the world sees SA, post-budget – The Wall Street Journal

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