Eskom has around R380 billion of debt, which it is unable to service. Photo Reuters
Eskom has around R380 billion of debt, which it is unable to service. Photo Reuters

Downsize Eskom debt, IMF urges SA

The IMF has completed its annual staff visit to SA urging the government to “downsize Eskom’s balance sheet and restore its commercial sustainability”.

This implies support for a government takeover of Eskom debt, although the statement is not that explicit. Eskom has around R380 billion of debt, which it is unable to service. While the Treasury provides Eskom with annual cash transfers to cover debt costs, it has been reluctant to take Eskom debt on to the sovereign balance sheet.

However, it is increasingly likely that finance minister Enoch Godongwana will make an announcement on Eskom debt in the medium-term budget policy statement in October.

Says the IMF: “Any solution to Eskom’s debt problem must be preceded and accompanied by concrete and credible actions to downsize the company’s balance sheet and restore its commercial viability. These include efforts to cut costs and collect arrears, as well as a more predictable tariff-setting mechanism.”

In a statement responding to the IMF report, the Treasury said it was “working on a sustainable solution to deal with Eskom’s debt in a manner that is equitable and fair to all stakeholders. Any solution will be contingent on continued progress to reform South Africa’s electricity sector and Eskom’s own progress on its turnaround plan and its restructuring”.

OBSTACLES

The IMF says that the “operations, finances and governance of Eskom and Transnet need to be improved decisively and quickly, as these are key obstacles to private investment and growth”.

The IMF also expresses concern about Transnet, which it says “needs to restore the operational capacity of the freight rail system and improve the efficiency of its ports”. This should include accelerating reforms that attract private sector investment.

The IMF staff report suggests that Treasury make use of the ongoing revenue windfall from high commodity prices to reduce debt and rein in unproductive fiscal spending to put the debt-to-GDP ratio on a declining path and boost confidence.

It expects the economy to continue its recovery after the pandemic as lagging sectors – tourism, hospitality and con­struction gradually catch up. Mitigating the impact of Covid-19 and recent floods, and preserving well-targeted social outlays, are key priorities.

‘INDISPENSABLE’

The SA Reserve Bank “will be indispensable” to keep inflation expectations anchored.

The Treasury statement again confirms its stance at the February budget that “any permanent increases in spending will be financed in a way that does not worsen the fiscal deficit”.

Government remained committed to restoring sustainability to public finances, it said, which has been supported by better-than-expected revenue collection, albeit tem­porary, and fiscal restraint.

“As stated in the 2022 Budget, government is using a portion of the additional revenue to reduce the fiscal deficit and stabilise debt, with the majority targeted to address urgent social needs, promote job creation through the presidential employment initiative, and support the public health sector.”

Other priorities, it added, include faster implementation of economic and SOE reforms, accompanied by fiscal consolidation to provide a stable foundation for growth, easing of investor concerns, and support a faster recovery and higher levels of economic growth.

– Fin24

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Namibian Sun 2024-03-28

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Nam 2.22 SAME | Oryx Properties Ltd 12.1 UP 1.70% | Paratus Namibia Holdings 11.99 SAME | SBN Holdings 8.45 SAME | Trustco Group Holdings Ltd 0.48 SAME | B2Gold Corporation 47.34 DOWN 1.50% | Local Index closed 677.62 UP 0.12% | Overall Index closed 1534.6 DOWN 0.05% | Osino Resources Corp 19.47 DOWN 2.41% | Commodities: Gold US$ 2 208.86/OZ UP +0.83% | Copper US$ 3.97/lb DOWN -0.0028 | Zinc US$ 2 445.40/T DOWN -0.45% | Brent Crude Oil US$ 87.07/BBP UP +0.79% | Platinum US$ 896.85/OZ UP +0.22% Sport results: Weather: Katima Mulilo: 19° | 37° Rundu: 17° | 33° Eenhana: 18° | 33° Oshakati: 20° | 31° Ruacana: 19° | 33° Tsumeb: 17° | 29° Otjiwarongo: 16° | 28° Omaruru: 18° | 31° Windhoek: 17° | 28° Gobabis: 17° | 28° Henties Bay: 16° | 19° Wind speed: 24km/h, Wind direction: S, Low tide: 10:54, High tide: 04:57, Low Tide: 22:58, High tide: 17:16 Swakopmund: 15° | 17° Wind speed: 29km/h, Wind direction: SW, Low tide: 10:52, High tide: 04:55, Low Tide: 22:56, High tide: 17:14 Walvis Bay: 16° | 22° Wind speed: 33km/h, Wind direction: SW, Low tide: 10:52, High tide: 04:54, Low Tide: 22:56, High tide: 17:13 Rehoboth: 18° | 29° Mariental: 22° | 32° Keetmanshoop: 21° | 34° Aranos: 21° | 31° Lüderitz: 15° | 29° Ariamsvlei: 23° | 34° Oranjemund: 15° | 21° Luanda: 27° | 30° Gaborone: 20° | 32° Lubumbashi: 17° | 24° Mbabane: 15° | 23° Maseru: 12° | 28° Antananarivo: 16° | 27° Lilongwe: 17° | 29° Maputo: 20° | 28° Windhoek: 17° | 28° Cape Town: 17° | 23° Durban: 21° | 25° Johannesburg: 18° | 28° Dar es Salaam: 26° | 32° Lusaka: 18° | 30° Harare: 15° | 31° Economic Indicators: Currency: GBP to NAD 23.99 | EUR to NAD 20.54 | CNY to NAD 2.63 | USD to NAD 19.05 | DZD to NAD 0.14 | AOA to NAD 0.02 | BWP to NAD 1.33 | EGP to NAD 0.39 | KES to NAD 0.14 | NGN to NAD 0.01 | ZMW to NAD 0.74 | ZWL to NAD 0.04 | BRL to NAD 3.8 | RUB to NAD 0.2 | INR to NAD 0.23 | USD to DZD 134.13 | USD to AOA 832.63 | USD to BWP 13.71 | USD to EGP 47.35 | USD to KES 130.98 | USD to NGN 1415.13 | USD to ZAR 19.05 | USD to ZMW 24.97 | USD to ZWL 321 | Stock Exchange: JSE All Share Index 73909.5 Up +0.41% | Namibian Stock Exchange (NSX) Overall Index 1516.02 Down -0.13% | Casablanca Stock Exchange (CSE) MASI 12981.98 Up +0.34% | Egyptian Exchange (EGX) 30 Index 28224.37 Down -2.87% | Botswana Stock Exchange (BSE) DCI Same 0 | NSX: MTC 7.75 SAME | Anirep 8.99 SAME | Capricorn Investment group 17.34 SAME | FirstRand Namibia Ltd 49 DOWN 0.50% | Letshego Holdings (Namibia) Ltd 4.1 UP 2.50% | Namibia Asset Management Ltd 0.7 SAME | Namibia Breweries Ltd 31.49 UP 0.03% | Nictus Holdings - Nam 2.22 SAME | Oryx Properties Ltd 12.1 UP 1.70% | Paratus Namibia Holdings 11.99 SAME | SBN Holdings 8.45 SAME | Trustco Group Holdings Ltd 0.48 SAME | B2Gold Corporation 47.34 DOWN 1.50% | Local Index closed 677.62 UP 0.12% | Overall Index closed 1534.6 DOWN 0.05% | Osino Resources Corp 19.47 DOWN 2.41% | Commodities: Gold US$ 2 208.86/OZ UP +0.83% | Copper US$ 3.97/lb DOWN -0.0028 | Zinc US$ 2 445.40/T DOWN -0.45% | Brent Crude Oil US$ 87.07/BBP UP +0.79% | Platinum US$ 896.85/OZ UP +0.22%