Explainer: Why Eskom wants the government to absorb its R100bn debt

Explainer: Why Eskom wants the government to absorb its R100bn debt

- Eskom is hoping for another government bailout to the tune of about R100 billion

- This comes despite Finance Minister Tito Mboweni telling the power utility to look to bond markets for funding

- The lack of proper maintenance at power plant has seen the nation plagued by loadshedding

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Eskom is expecting the government to absorb a portion of its debt as part of a rescue plan for the state-owned entity. According to Business Day, Eskom expects the state to fork out around R100 billion.

This move comes despite Tito Mboweni, Finance Minister, having told Eskom to look to bond markets for funding instead of depending on state bailouts as it has in the past.

Eskom has increased its debt to R419 billion and as a result, has resorted to loadshedding after a lack of maintenance has seen it unable to meet the demands on supply.

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While Eskom has yet to approach the government with a proposal, any proposition for a bailout would be assessed on the context of the turnaround plan that Eskom will be presenting soon according to National Treasury spokesman Jabulani Sikhakhane. According to him, the government’s stance is that funding must be ‘done in a deficit-neutral manner’

If this comes to pass the proposal could add 2 percentage points to the countries debt-to-GDP ratio, putting even more strain on South Africas already strained economy.

According to News24, Eskom refused to comment on the turnaround plan until stakeholders had been consulted. The Minister for public enterprises, Pravin Gordhan, has also declined to comment.

READ ALSO: Total blackout is a possibility for SA, according to Eskom expert consultant

The concerns at Eskom are just the tip of the iceberg in respect to the regression of state-owned entities during the rule of ex-president Jacob Zuma. Although President Cyril Ramaphosa has set up commissions of inquiry to look into the matter the task at hand is almost insurmountable.

Briefly.co.za reported recently that Energy expert Ted Blom has blamed mismanagement at Eskom as well as the ANC’s insistence on filling vacancies with members from within the party as opposed to finding qualified professionals for the current state of affairs.

“ I think its very gross mismanagement, together with the appointment of an incompetent board that has no experience in the industry. The last thing you do when you have a problem and want it fixed up is to appoint people who have no idea of what's going on.” Blom said.

This news is likely to put a damper on yesterday's news that South Africa had come out of its technical recession, with the GDP growing by 2.2% in the third quarter of the year.

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Source: Briefly.co.za

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