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South Africa May Boost Borrowing Needs to Fund Eskom Rescue
South Africa May Boost Borrowing Needs to Fund Eskom Rescue
23 Jul 2019, 08:13 PM IST
(Bloomberg) -- South Africa may increase its borrowing plans following the latest bailout announced for struggling state-owned power utility Eskom Holdings SOC Ltd., Finance Minister Tito Mboweni told lawmakers Tuesday.
- Eskom, seen as the biggest threat to the nation’s economy, will get an additional 59 billion rand ($4.2 billion) spread over two years.
Key Insights
- Mboweni reiterated that the aid, combined with lower expected tax revenue, will come at a significant cost to taxpayers. Still, President Cyril Ramaphosa’s government is under pressure to show it’s got a plan to deal with Eskom as the utility struggles under more than 440 billion rand of debt.
- An increase in government debt to help Eskom could raise the risk that the country loses its sole remaining investment-grade credit rating from Moody’s Investors Service. The minister’s warnings that the government may miss its revenue collection target and have to change its borrowing plans before the mid-term budget in October and its other spending plans may further spook financial markets.
- The government is urgently working to stabilize Eskom, which needs the aid to meet its financial obligations this year, while working on a broad strategy for its future, Mboweni said. Eskom is not financially sustainable as it stands, he said.
Related Coverage
--With assistance from Mike Cohen.
To contact the reporters on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net;Rene Vollgraaff in Johannesburg at rvollgraaff@bloomberg.net
To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net, Liezel Hill
©2019 Bloomberg L.P.
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