South Africa’s Eskom May Require More Bailouts

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The South African government may be forced to inject more money into state power firm Eskom by the end of March if the struggling utility fails to meet its borrowing plan, a Treasury official told parliament on Wednesday.

Eskom supplies more than 90% of South Africa’s electricity but does not generate sufficient cash to meet its debt-service costs and relies on state bailouts to stay afloat, Reuters has reported.

Plant outages this year led to some of the worst blackouts in years in South Africa and ratings agencies regularly cite Eskom as one of the biggest threats to South Africa’s investment-grade credit rating status.

The Treasury has already earmarked 26 billion rand ($1.7 billion) to Eskom in the financial year which ends in March 2020 as part of special legislation to inject 59 billion rand over two years. That is on top of a 23 billion rand a year bailout for the next three years.

“Failure to execute its funding plan may result in Eskom experiencing liquidity shortfalls at 31 March 2020 and require additional funding in addition to funding provided through the Special Appropriation Bill,” the National Treasury’s director general, Dondo Mogajane, told lawmakers.

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