Emerging Markets | Fiscal Policy
EM Under the Spotlight – Eskom Debt Takeover: No Panacea for SA’s Weak Growth
- By Caroline Grady
- 4 min read
Summary
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- South Africa’s three-year debt relief for Eskom comes in the form of a convertible loan with conditionality on equity conversion tied to capex on transmission and distribution.
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- No new borrowing is allowed by Eskom over the period with the R254bn covering all capital and interest payments.
-
- Eskom’s balance sheet should improve and free up space for needed investment. But it does not solve near-term issues on loadshedding, corruption and governance.
-
- The impact on sovereign finances looks manageable. Public debt rises but earlier planned equity support will end, which should help the primary balance, and contingent liabilities are reduced.
Summary
-
- South Africa’s three-year debt relief for Eskom comes in the form of a convertible loan with conditionality on equity conversion tied to capex on transmission and distribution.
-
- No new borrowing is allowed by Eskom over the period with the R254bn covering all capital and interest payments.
-
- Eskom’s balance sheet should improve and free up space for needed investment. But it does not solve near-term issues on loadshedding, corruption and governance.
-
- The impact on sovereign finances looks manageable. Public debt rises but earlier planned equity support will end, which should help the primary balance, and contingent liabilities are reduced.
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