As South Africa enters its third day of blackouts, investors are still awaiting word from President Cyril Ramaphosa’s administration on how it’s going to fix the ailing state power company.
Eskom, which has been without a permanent chief executive officer since August, is so cash-strapped it can’t service its debt and properly maintain aging plants. While the government has said plans to split Eskom into three operating units and reorganize its debt will be announced by the end of October, as will a new CEO, the cabinet didn’t mention the issues in a statement issued Thursday.
The cabinet is due to meet again on October 31, two days after Finance Minister Tito Mboweni is scheduled to release his mid-term budget that should spell out how he’ll fund a three-year, R128bn bailout for Eskom. Investors are looking for greater urgency to be shown in getting the company, considered the biggest threat to Africa’s most industrialized economy, back on track.
“The main concern of all foreign investors is to fix Eskom,” said Colin Coleman, CEO of sub-Saharan Africa at Goldman Sachs. “We expect a phase of stabilization of Eskom in terms of governance, operations and finances to come in by the end of the year, following which a corporate restructure will start.”
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Eskom has shed 2,000 megawatts of power from the grid since Wednesday. No more power cuts are expected after Friday, Chairman Jabu Mabuza told reporters late Thursday in Johannesburg.
Power shortages in the first quarter contributed to South Africa’s biggest economic contraction in a decade and the central bank expects the growth rate to reach just 0.6% this year – a forecast that may prove optimistic given the resumption of outages. The cuts could cost South Africa its last investment-grade credit rating from Moody’s Investors Service, which is due to deliver its next assessment on November 1.
Eskom has amassed R450bn of debt, and the government needs to work out a mechanism to take as much as 250 billion rand of that off the utility’s balance sheet, according to Coleman. Eskom’s management said in a presentation in August that one option was to move most of the debt onto the government’s balance sheet.
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Source: The Citizen
