Page 5 - AfrElec Week 40

AfrElec COMMENTARY AfrElec
At the start of October, the Institute of Inter- national Finance, a Washington-based body that represents global nancial institutions, warned that South Africa’s public debt could rise as high as 95% of GDP by 2024 if the government does not restructure Eskom and implement a worka- ble growth plan.
“South Africa’s debt sustainability is increas- ingly in question,” the IIF said.
Crucially, the IIF said the government’s pro- posed plan to shi Eskom’s debt to the govern- ment would add 6 percentage points to South Africa’s sovereign debt.
Downgrade warning
Eskom’s woes come as Renaissance Capital called for Moody’s to downgrade South Africa’s investment grade Baa3 rating in November.
“ e macro numbers are not supportive of South African keeping investment grade,” said Renaissance Global Chief Economist Charles Robertson said.
“Poor growth, tough public nances, a sub- dued commodity outlook, tension on the streets as seen in the anti-Nigerian riots, questions about the president’s ability to push through his agenda - all these are worrisome.”
is view contrasts with Bloomberg’s recent
survey of 54 investors in emerging markets, 64% of whom expected South Africa to keep its investment grade rating.
Moody’s is the last ratings company to keep South Africa at investment grade, with S&P Global Ratings and Fitch Ratings downgrading the country to junk status in 2107. Moody’s con- rmed South Africa’s Baa3 rating in May. e next review is due on November 1.
Eskom is a very political company, and how the government structures its bail out will be crucial for the ruling ANC party. Any propos- als to sell o power plants, or even break up the company, will face opposition from the ANC’s traditional support in labour unions.
The clock is running down to the end of October deadline, when the government pre- sents its budget.
Eskom’s preference is for the government to take on the majority of its ZAR440bn ($29bn) debt. It told a bondholders’ conference in Lon- don in August that it could manage to service ZAR150bn ($9.8bn) of debt but no more.
e government will also be worried about fostering the country’s miniscule economic growth, which stood at 0.8% in 2018 and could be threatened by the costs of bailing out Eskom.™
Eskom’s Medupi power plant, which is now due to be brought online in 2021
Week 40 09•October•2019 w w w . N E W S B A S E . c o m
P5