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The state is likely to do everything it can to stop Eskom from defaulting on debt due at the end of March.
Ultimately, it will need to bail out the stricken power utility.
Treasury director-general Dondo Mogajane said this week that Eskom needed between R20 billion and R23 billion to meet lending covenants.
Eskom has recently been raising a minimal amount of money through its local bonds, amid investor aversion given the state of its finances and poor corporate governance.
Old Mutual economist Johann Els said that government would probably have to bail Eskom out by hiking its debt and widening the budget deficit.
This would be negative for government’s credit rating, which is dangerously close to being assessed as “junk” by major international ratings agencies.
In a reflection of the dire state of Eskom’s finances, Development Bank of Southern Africa CEO Patrick Dlamini called on Deputy President Cyril Ramaphosa and Finance Minister Malusi Gigaba to “address the issue of Eskom”.
“It is a matter that needs to be addressed with the utmost, extreme urgency,” he said at a pre-World Economic Forum event.
Ramaphosa said Eskom’s woes were being addressed. Gigaba said Eskom’s lenders had been highlighting, as early as October last year, at International Monetary Fund/World Bank annual meetings in Washington, that “we need to act”.
“The national fiscus is not going to be ready to bail out Eskom. Nobody would have the quantum of resources required. We need to act now.”
Konrad Reuss, managing director of S&P Global Ratings for sub-Saharan Africa, said there was a “clear danger” that Eskom could default on its debt, according to Bloomberg
