Eskom wants SA government to shoulder debt

12 Aug 19

Struggling South African state power utility Eskom wants the majority of its 440bn rand ($29bn) debt transferred to the country’s government.

Company executives reportedly told investors at a roadshow that the corporation can only sustain R160bn rand of debt, according to the Bloomberg news agency.

South Africa has been plagued by power cuts while Eskom – which has been bedevilled by financial problems – has been heavily criticised for poor performance despite soaring electricity prices.

The utility reportedly sought a further 15% increase in prices after the country’s regulator granted it a 4.41% rise for 2019–20 and approved a 5.23% average price increase that came into effect in April.

Over the past decade, Eskom’s electricity prices have increased by about 356% – placing a significant burden on ordinary consumers – while inflation over the same period was 74%.

The roadshow in London followed the announcement of Eskom’s staggering R20.7bn annual loss, reported Bloomberg. 

According to the National Treasury, Eskom had used R295bn of the guarantees offered by the government by the end of the fiscal year in March, the agency said.

Authorities recently increased the size of a bailout to keep the state-owned company afloat to R128bn over the next three years while it undertakes restructuring to make it profitable.

Critics of Eskom have long argued for the need to break up its monopoly by splitting it into separate power production and distribution businesses.

According to the ratings agency Moody’s, Eskom will require “significant external support” if it is to undertake a successful turnaround.

The country’s presidency has recognised that cost savings alone will not be sufficient, the agency believes. It is now proposed to split the utility into three units after the National Treasury’s mid-term budget in October. 

Executives at the company also want the government to help resolve the issue of unpaid debt from municipal customers in South Africa.

In July the head of the South African Institute for Chartered Accountants, Freeman Nomvalo, was given the task of restructuring the utility.

Nomvalo will report to the ministers of finance and public enterprises, as well as to the Eskom board, with his main role investigating proposals to ease its debt burden.

  • Gavin O'Toole

    A freelance journalist. He has written six books about Latin America and taught the politics of the region at Queen Mary, University of London.

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