Date:Jul 26, 2018
Like an energy-saving bulb warming up, there’s a glimmer of hope at the financially beleaguered and Zuptoid-plundered/mismanaged Eskom. That’s because of a combination of a life-sustaining relatively small loan from China and potential debt underwriting by the Public Investment Corporation (PIC). The former seems set to keep the lights on in the short term while the latter would give it more debt flexibility, medium term. One wonders what the hundreds of thousands of civil servants whose pensions are tied up in the PIC, feel about the current talks. The PIC doesn’t exactly have a proud record of wise, non-partisan funding, the soft loan to the blatantly ANC-supporting Independent Newspapers being one example. Underwriting a shaky public enterprise like Eskom certainly aligns ideologically, given that the principals in both entities share similar world-views – which as history has taught us ruling parties mistakenly assume is patriotic. This also makes it easy to paint striking Eskom workers as near-treasonous. Let’s not knock that most precious of all South African commodities though – realistic hope. It seems there’s finally reason for it, with ministerial talk of the Eskom debt-elephant being broken down into manageable entities. – Chris Bateman
By Paul Burkhardt
(Bloomberg) – South Africa is getting down to the business of fixing its debt-ridden state power utility.
Eskom Holdings SOC Ltd. had R399 billion ($30 billion) of debt at the end of March, according to data compiled by Bloomberg, and has been flagged by ratings companies as a key risk to South Africa’s economy. The utility has been mired in a series of scandals, struggled to raise funds and was forced to implement rolling blackouts last month after wage talks with unions broke down.
Eskom announced Tuesday it’s secured a $2.5 billion long-term loan facility from China Development Bank, giving a big boost to its fundraising efforts this year. About an hour later, a top official in the ruling African National Congress told reporters the Public Investment Corp. is in talks about converting part of the debt it is owed by the state power utility into equity.
File Photo: Cooling towers operate at the Hendrina power station, operated by Eskom Holdings SOC Ltd. Photographer: Waldo Swiegers/Bloomberg
“We’re seeing sufficient signs that management at Eskom cares about dealing with the problem and we’re seeing progress,” said Darias Jonker, an Africa analyst at risk-advisory firm Eurasia Group. The moves are “a sufficient encouragement that Eskom is too big to fail and that a default is unlikely,” he said.
The CDB loan was announced as part of a series of investments by China in South Africa after a meeting between President Cyril Ramaphosa and his Chinese counterpart, Xi Jinping, in Pretoria. The facility takes Eskom’s secured funding to more than 60 percent of requirements for this year, Chief Executive Officer Phakamani Hadebe said.
