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Post-Zuma babalaas: Eskom now wants govt to absorb R100bn debt
JOHANNESBURG — With rolling electricity blackouts becoming the order of the day once again in South Africa, it seems rather interesting that they’re happening at the same time that Eskom is seeking ways to plug holes in its massive debt. The embattled electricity provider wants the government to absorb a massive R100bn in debt – a figure that is so big it would add two percentage points to the country’s debt-to-GDP ratio. This ratio is already experiencing negative momentum by drifting well north of the 50% mark – a very unhealthy marker for a developing nation like South Africa. But this is, after all, all thanks to a massive hangover from the plunder of the Zuptoid years, which have left the country’s finances in a dire state. The question now is whether Eskom can be viable again – it’s looking increasingly unlikely. – Gareth van Zyl
(Bloomberg) – Eskom Holdings SOC Ltd. wants the South African government to absorb about R100bn ($7.2bn) of debt as part of a rescue plan for the state-owned utility, Business Day reported, a move that may put further strain on already stretched state finances.
The proposal may add 2 percentage points to South Africa’s debt-to-GDP ratio, the Johannesburg-based newspaper said. It cited Eskom Chairman Jabu Mabuza as speaking on the proposal in an interview during an investor roadshow.
The report comes after Finance Minister Tito Mboweni said Eskom should go to bond markets for funds rather than rely on state bailouts, which have been used in the past. The utility’s debt has increased to R419bn, and the company has resorted to rolling blackouts as insufficient spending on maintenance has reduced its ability to generate electricity.
While the government hasn’t received a proposal from Eskom, any proposition for debt relief will have to be assessed in the context of the turnaround plan that Eskom is expected to present soon, National Treasury spokesman Jabulani Sikhakhane said in an emailed response to questions. The government’s policy stance is that funding for state companies must be “done in a deficit-neutral manner,” he said.
Key Risk
Eskom won’t comment further on the turnaround plan until all “stakeholders” have been consulted, spokesman Khulu Phasiwe said by phone. Pravin Gordhan, the minister for public enterprises, declined to comment.
Eskom’s troubles represent a wider decline at South Africa’s state companies during the nine-year tenure of former President Jacob Zuma, during which corruption became rife. His successor, Cyril Ramaphosa, has pledged to wipe out graft and has shaken up management at Eskom, ports and rail firm Transnet SOC Ltd. and South African Airways, yet the task at hand is considerable.
Ratings agencies have warned that Eskom is a risk to the health of South Africa’s economy, and the latest news is likely to take the gloss off better-than-expected GDP figures on Tuesday, which lifted the country out of recession.
The rand was little changed at 13.8545 to the dollar at 8:10am in Johannesburg Wednesday, after weakening 1.2% the day before.
Cost compression, revenue enhancements and debt relief are core aspects of Eskom’s turnaround strategy, Business Day cited Mabuza as saying.
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