By Alec Hogg
South Africa has much to be grateful for. To repeat the metaphor a leading banker shared this week – the front wheels of the car were over the edge of the cliff, but the vehicle was stopped in time. The scale of the challenge, however, is evident in the precarious position of the state-owned electricity supplier Eskom.
Gupta pillaging and rampant corruption at the new Medupi and Kusile power stations has pushed the once proud utility into a classic debt trap. Eskom no longer generates enough free cash flow to service its interest commitments, let alone repay the capital on its debt mountain.
Eskom has a year’s breathing space after an emergency injection from the State’s pensioners and additional bank loans guaranteed by central government. But when you’re up a creek without a paddle, 12 months can pass in a flash.
On the upside, South Africa’s most effective cabinet minister is now responsible for this ticking time bomb. And he enjoys the full support of an economically literate president. On the downside, even Pravin Gordhan’s miracle working power has limits.