- IMF says South Africa’s government takes over R392billion.
- Eskom’s debt to the state’s balance sheet would make the utility financially viable and smooth its planned split into different sectors.
- According to the IMF, transfers to Eskom have averaged around 1% of GDP over the last two fiscal years, while its government-guaranteed loan facility is about 6%
According to the International Monetary Fund, South Africa’s government is considering taking over part or all of Eskom’s R392 billion debt to restructure the cash-strapped power utility’s loan obligations. The Washington-based lender said in a statement published on its website following online meetings between its staff and South African officials that Eskom’s financial position is of particular concern and that a decision on how to address its “unsustainable” debt levels is required.
According to the report, local officials debate whether the state should assume part or all of the debt upfront or continue making annual transfers of funds to the company, which could be higher than budget estimates. While transferring Eskom’s debt to the state’s balance sheet would make the utility financially viable and smooth, its planned split into the transmission, generation, and distribution businesses, would cause a significant deterioration in the country’s already stressed finances.
Soaring debt and debt-service costs, which have been the fastest-growing expenditure line item in the budget since 2011, are already major threats to fiscal sustainability and have been exacerbated by the aftermath of the coronavirus pandemic and years of overspending, mismanagement, and graft. According to the IMF, transfers to Eskom have averaged around 1% of GDP over the last two fiscal years, while its government-guaranteed loan facility is about 6%.
In November’s medium-term budget policy statement, the National Treasury made no additional provisions for Eskom. Instead, Finance Minister Enoch Godongwana suggested that the utility sell some coal-fired power stations to reduce its debt burden. The government has previously stated that it may assume some of the utility’s debt but has never stated that it is considering taking on all of it.