Had load shedding not been enough to let you know things aren’t alright at Eskom, news coming from the utility today might.
A report by Business Day (paywall) reveals that Eskom plans to ask the government to absorb as much as R100 billion of its debt.
Earlier this year Business Insider reported that Eskom’s debt had climbed 50 percent in four years and the total debt was greater than South Africa’s budget for healthcare and education.
Now, Eskom hasn’t approached government with this proposal yet with Tech Central reporting that Eskom chairman, Jabu Mabuza, mentioned the proposal during an interview at an investor roadshow.
Should the entity have the gall to approach government asking it to absorb the utility’s debt, it’s likely that government’s decision will be influenced by Eskom’s turnaround plan.
That having been said government has a habit of bailing SAA and Eskom out of sticky situations. The trouble is that absorbing R100 billion of Eskom’s debt might have a negative impact of our local debt-to-GDP ratio.
The figure could add two percentage points to the aforementioned ratio. Having just been pulled out of a technical recession, adding more debt to our already struggling balance sheet is likely not the best idea.
With all of that taken into account we feel that something drastic needs to happen to turn the Eskom ship around. Whether getting government to absorb some of Eskom’s debt is the best solution remains to be seen.