South Africa's government to take on over half of Eskom's debt

Treasury said the government planned to take on 254 billion rand ($14 billion) of Eskom's 423 billion rand debt it said was at risk of default, to enable the utility to pay down the debt and interest obligations.

South Africa has been struggling for years to overhaul Eskom, which is plagued by corruption and mismanagement and has received 263.4 billion rand in bailouts since 2008/09.

Eskom is implementing the worst power outages on record, hurting economic growth that is projected at 0.9 % this year. President Cyril Ramaphosa declared a "state of disaster" over the energy crisis earlier this month.

"Our economy is facing significant risks," Finance Minister Enoch Godongwana said in his budget speech. "Uncertainty is on the rise. It requires us to do bold things."

Treasury said about 168 billion rand of Eskom’s debt relief will be in capital and 86 billion rand in interest payments over the next three years.

Of this, 66 billion rand will be funded through the budget while 118 billion rand will be additional borrowing over the period, with government directly taking over up to 70 billion rand of Eskom’s loan portfolio in 2025/26.

As a result, South Africa's gross debt is now seen stabilizing at 73.6% of GDP in 2025/26 compared with 71.4% of GDP in 2022/23 seen in October.

But the consolidated budget deficit is seen narrowing to 4.0% of GDP in 2023/24, the lowest in four years, as higher commodity prices boost mining tax receipts. It is projected at 3.2 % in 2025/26.

"This is not an austerity budget. It is a budget that makes tough trade-offs in the interests of the country’s short- and long-term prosperity," Godongwana said.


REUTERS