South Africa’s treasury vowed on Wednesday to swallow more than half of Eskom’s multi-billion-dollar debt to ensure the power utility remains afloat and curb the energy crisis that has put a break on growth.
Finance Minister Enoch Godongwana announced in a mini budget statement that the government will be giving Eskom R225 billion towards their debt for the period 2019 to 2026.
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According to Godongwana, the debt takeover will ensure the company no longer relies on government bailouts and can focus on plant performance and capital investment.
Eskom, dubbed our economy’s biggest risk, is bucking under a R400 billion debt.
“The debt takeover, once finalised, together with other reforms will ensure that Eskom is financially sustainable,” says Godongwana.
For more than a decade, the government has been pouring billions of rands into Eskom, “with limited improvements in the reliability of the electricity supply or the financial health of the company,” continues Godongwana.
Sweeping blackouts caused by breakdowns of poorly maintained substations ‒ which supplies most of South Africa’s electricity ‒ have worsened in recent months and severely hampered economic growth.
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According to budget documents, projected economic growth for this year is at 1.9% which falls dismally from the 4.9% of the previous year.
Economists have welcomed the government’s move, but believe more needs to be done.
“Transferring between one-third and two-thirds of Eskom’s debt to the government will support the corporation’s financial sustainability,” said Moody Investors Service’s Aurelien Mali.
But will not alone resolve its maintenance and operational challenges, which continue to be a drag on the South African economy,” adds Mali.
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Picture: Cape {town} Etc Gallery