Business News: Eskom bailout causes investors to balk at debt

Business News: Eskom bailout causes investors to balk at debt

- During SONA, President Ramaphosa announced a bill to provide Eskom with R230 billion in funds

- However, some worry that this bailout has spooked investors

- This comes as uncertainty around the power utility remains a major obstacle to investor confidence

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Cyril Ramaphosa's pledge to allocate R230 billion for Eskom over the next 10 years is good news for the power utility, but has reportedly been received negatively by many investors.

The president announced during his State of the Nation Address that he would table a motion to allocate more funds to Eskom.

However, Treasury has reportedly not budgeted for this extra expenditure.

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The R230 billion comes on top of the R69 billion announced by Finance Minister Tito Mboweni, which will given to Eskom over the next 3 years.

According to Fin24, investors have been trying to factor in the increased risk Eskom poses to South African debt, especially with these new funds allocated for the state-owned enterprise.

However, some experts says it is difficult to calculate the exact impact this announcement will have until it is known exactly how much money Eskom will require for immediate support.

Additionally, government's failure to reduce debt has some worried that credit ratings agencies may once again downgrade South Africa's credit to junk status, has gathered.

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Indeed, one expert has stressed that the country's ratio of debt to GDP "does not look healthy at all" and that the continued uncertainty around Eskom will likely harm the economy.

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