· Addressing the “unsustainable” debt levels of the cash-strapped power utility Eskom’s loan obligations was the main agenda of discussions of the IMF and the South African Government recently.
· According to the IMF statement published, South African authorities are examining whether the state should take over part or all of the debt of Eskom or continue the existing system of making annual transfers of funds
In a bid to revive and restructure Eskom, the South African government is contemplating taking over part or all of Eskom’s R392 billion ($25.8 billion) debt. This emerged following on line meetings between IMF and South African officials on how to address the “unsustainable” debt levels of the cash-strapped power utility’s loan obligations.
According to a statement published on the website of the International Monetary Fund, the South African authorities are examining whether the state should take over part or all of the debt of Eskom or continue the existing system of making annual transfers of funds to the company. The IMF estimated that transfers to Eskom averaged about 1% of GDP in the past two fiscal years.
Transferring Eskom’s debt onto the state’s balance sheet would make the company financially viable and its planned split into transmission, generation and distribution businesses, viable. However, the transfer of debt will weigh heavily on the nation’s already stretched finances.
The Gross government debt touched R4.27 trillion at the end of last year, compared with the National Treasury’s November estimate of R4.31 trillion, or 69.9% of gross domestic product, for the current fiscal year.
The South African economy is already under severe pressure due to the rising debt and debt-service costs, straining the budget since 2011, deepened by the fallout from the coronavirus pandemic, years of overspending, mismanagement and graft.
Finance Minister Enoch Godongwana suggested that the utility sell some of its coal-fired power stations to reduce its debt burden.
