From the news desk

Govt will finally announce its plan for Eskom today

Share this article
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  

The Minister of Public Enterprises, Pravin Gordhan, will at midday on Tuesday release government’s long-awaited Special Paper on Eskom.

In a statement, his office said that he will set out in detail a comprehensive roadmap for Eskom in a “reformed electricity supply industry”.

Gordhan is expected to announce that Eskom will be split into three entities: generation, transmission and distribution.

A recent Treasury policy document suggested that Eskom may even sell its coal-fired power stations, possibly through a series of auctions. According to a Bloomberg report the Public Investment Corporation, which holds a large amount of Eskom bonds, may get involved.

Eskom, which has R450 billion in debt, is a massive burden on government’s financial position. The Special Paper will be announced a day before the medium-term budget policy statement, and also just before Moody’s announces its latest decision on South Africa’s credit rating, on Friday.

Recently, President Cyril Ramaphosa told a group of investors in London that government will propose “innovative ideas” to deal with Eskom debt. “I think Moody’s and others will be happy with the announcements made,” Ramaphosa said.

READ: ‘I think Moody’s will be happy’ – Ramaphosa says plan to deal with Eskom debt imminent

Moody’s is the only one of the credit rating agencies that hasn’t yet downgraded South Africa to junk. A “junk” rating means the agency believes there’s is a bigger chance that government won’t be able to pay back its creditors.

If SA lost its investment rate grade from Moody’s as well, it would cost the country its place in the most important group of government bonds. The Citigroup’s World Government Bond Index contains only bonds that are investment grade.

READ: Investors prepare for the worst as Eskom’s D-Day looms

All the many overseas investment funds that are only allowed to invest in investment grade bonds will be forced to sell their South African government bonds.

Bank of America previously estimated that South African bonds would be sold off to the tune of $14 billion (R200 billion). This would hike the cost of government debt – and will probably necessitate higher taxes.

(SOURCE: FIN24)


Share this article
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
WhatsApp WhatsApp us
Wait a sec, saving restore vars.