Home South African Godongwana hints state could take on some of Eskom’s huge debt

Godongwana hints state could take on some of Eskom’s huge debt

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Finance Minister Enoch Godongwana has given the strongest indication yet that the government is to shoulder a portion of Eskom’s monumental R396 billion debt to make the SOE more sustainable.

Finance Minister Enoch Godongwana. File Picture: Phando Jikelo/African News Agency (ANA)

FINANCE Minister Enoch Godongwana has given the strongest indication yet that the government is to shoulder a portion of Eskom’s monumental R396 billion debt, in a bid to ease the burden on the struggling utility’s balance sheet.

Earlier this month, Eskom’s chief executive André de Ruyter said the struggling power utility would only be sustainable, if its debt was reduced to R200bn.

Speaking at a media briefing on Monday, Godongwana said the National Treasury would be tabling its proposal at the next Cabinet lekgotla as it was still deciding how much of the debt it can take on.

Godongwana said there was an accepted issue even in the capital markets that Eskom’s debt was unsustainable, and that it posed a risk to the sovereign.

“To avoid that sovereign risk we have got to step in. That principle is kind of agreed (on) and we will be going to the Cabinet lekgotla in the first week of September with that proposal to deal with the debt issue,” Godongwana said.

“What has not been settled on currently is the quantum of that (debt), and as to how much will be taken by the sovereign, but the principle is there …

“At the moment, both Treasury officials and Eskom officials are developing scenarios which we will table before the Cabinet.

“So the principle is settled, which we are taking to the Cabinet lekgotla in due course. The final quantum and the scenarios, and the conditions precedent and the conditions post the transaction will also be dealt with on October, 26 in the Medium-Term Budget Policy Statement,” the minister said.

South Africa’s sovereign debt burden currently stands at R4.35 trillion, or about 70 percent of GDP, with debt-service costs averaging R330bn annually.

The National Treasury has been reluctant to take Eskom debt onto the sovereign balance sheet, fearing that it would trigger a credit ratings crisis, but has continued providing it with annual cash transfers to cover debt costs.

However, the International Monetary Fund (IMF) in June advised the government to “downsize Eskom’s balance sheet, and restore its commercial sustainability”.

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