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Eskom begins search for cash as IMF threats are aired
SOUTH AFRICA
SOUTH Africa’s ruling ANC has suggested that the government borrow from the country’s domestic nancial markets in a bid to shore up Eskom’s nances.
ANC economic policy head Enoch Godong- wana said last week that the government should borrow from the country’s fund managers and pension funds rather than the IMF, the World Bank or on international markets.
e party has already proposed its so-called prescribed assets policy, whereby fund manag- ers, insurance companies and banks must invest in government-approved instruments to raise money to shore up state-owned companies.
The opposition Democratic Alliance said that such domestic borrowing would be “irre- sponsible and unacceptable,” and would expose the pensions of millions of South Africans to Eskom’s risk.
Indeed, the problem with borrowing on the domestic market is that the country’s domestic funds are already heavily exposed to Eskom’s high risk. For example, the Government Employ- ees Pension Fund (GEPF) holds ZAR54.8bn ($3.6bn) worth of Eskom bonds, or 16.8% of all the debt outstanding, more than ve times the next biggest holder, according to data compiled by Bloomberg.
Eskom’s debts stand at ZAR440bn ($29bn), and the government-appointed chief restructur- ing o cer, Freeman Nomvalo, has yet to come up with any plans.
He did warn earlier in August that he had only weeks, not months, to determine how much debt the government will take over.
The government has offered ZAR250bn ($16.4bn), while Eskom itself has suggested ZAR290bn ($19bn), leaving it with a total of ZAR150bn ($9.8bn), which the company main- tained was manageable.
Politicians have been making these references to the IMF in recent days, although the fund itself has not made any statement.
Last week, Montfort Mlachila, the IMF’s sen- ior resident representative in South Africa, told the Bureau for Economic Research, a research institute at Stellenbosch University, that the fund did not see a balance-of-payments problem in South Africa, which means there is no need for IMF support.
However, the IMF did visit the country in June, concluding that South Africa’s growth out- look was dependent on the pace of structural reforms, particularly at Eskom.
“Debt pressures are likely to further increase in the near term. Weak nances and operations of public enterprises, particularly Eskom, repre- sent a major downside risk to growth and the s- cus,”saidIMFmissionleaderAnaLuciaCoronel at the time.
“Eskom will require bold action to rede ne its business model so that it becomes self-sus- tained and ensures a ordable and reliable elec- tricity supply. Without fundamental reforms in Eskom’s nances and operations, continued budget transfers or assumption of its debt by the government will not resolve the company’s issues. Postponing the needed adjustment of the entity will only force greater di culties down the road,” she warned.
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w w w . N E W S B A S E . c o m Week 33 21•August•2019
