The minister said in October the state will absorb between one- and two-thirds of Eskom’s liabilities of about R400bn.
The amount and some of the transfer terms are likely to be announced in his budget on February 22. Nine of 17 economists surveyed by Bloomberg believe government can afford to assume half the utility’s loan obligations without compromising efforts to reduce the budget deficit and rein in debt. Reducing Eskom’s liabilities will allow the loss-making company to raise funds to carry out plant maintenance and strengthen the power grid. However, it will also add to the state’s overall debt burden of almost R5-trillion and to its debt service costs, the fastest-growing expenditure line item for about a decade.
Godongwana has previously said National Treasury will make relief contingent on Eskom meeting performance targets and the transfer of funds will be staggered. He doesn’t envision the utility’s bondholders being asked to take haircuts, which would be tantamount to default. Finance minister Enoch Godongwana faces the task of incorporating a credible debt relief plan for the stricken state power utility while record blackouts weigh on the economy.
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