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Cash-strapped state-owned entities Eskom and Transnet have received a massive cash injection from the Chinese.
China’s president Xi Jinping and his delegation signed about $14 billion [about R187 billion] worth of investment commitments with South Africa – and the two enterprises were at the centre of the bilateral agreements.
Eskom, who on Monday announced a loss of R2.3 billion, received the bulk of the investment, signing a term facility agreement of $2.5 billion, or R33 billion, with the China Development Bank.
Speaking from the Union Buildings offices in Pretoria, where the loan agreement was signed, Eskom chief executive Phakamani Hadebe said the loan was part of Eskom’s funding requirements for the financial year, which was currently at 62%.
“This is a normal loan, effective as from the day of the signing. The loan will help us ease some of the liquidity challenges we are facing,” said Hadebe.
He said the loan demonstrated confidence in Eskom’s new board and management.
Transnet also received a sizable cash injection from the Commercial Bank of China, while other sectors of the economy also received investments from the Asian country.
President Cyril Ramaphosa hosted Xi at the Union Buildings offices in Pretoria on Tuesday on a State visit ahead of the Brics summit.
The two leaders took the opportunity to “strengthen the comprehensive strategic partnership” between the two Brics nations as they signed several agreements and memorandums of understanding “intended to deepen relations”.
Among the major investment commitments agreed upon were proposed investment injections by the China Development Bank and Industrial and Commercial Bank of China to Eskom and Transnet respectively.
The banks signed “term facility agreements” with the two South African state-owned entities and the agreements are understood to be loan agreements.
South Africa is China’s biggest trade partner in Africa. Ramaphosa said trade figures had grown steadily between the two countries over the past few years, but bilateral trade had not yet reached its full potential.
“Xi Jinping sees Africa, and South Africa in particular, as a region of special interest where China continues to play a supporting role,” said Ramaphosa.
Ramaphosa has focused on revitalising Eskom, Africa’s largest public utility, which has been embroiled in corruption scandals under former president Jacob Zuma and narrowly avoided a liquidity crunch early this year after banks halted lending. So it came as no surprise that most of the investment went to the state-owned entity.
China is now the single greatest investing country to the continent and with its trade war with the United States having taken effect it was expected that most of the Asian country’s investment may be for South Africa’s earth metals or other products that were hit by hefty tariffs by the US.
“We need to put people at the centre of our cooperation so that both the Chinese and South African people will gain greater benefit from our collaboration,” said Xi.
