South Africa unveiled a $4.8bn bailout for Eskom, the struggling state-owned power monopoly whose blackouts have throttled the economy and is skirting collapse.
The government will inject 69bn rand ($4.8bn) over three years to stabilise Eskom’s $30bn debt as it attempts a turnround, Tito Mboweni, South Africa’s finance minster, said as he delivered the national budget on Wednesday.
“The national government is not taking on Eskom’s debt. Eskom took on the debt. It must ultimately repay it. We are setting aside 23bn rand a year to financially support Eskom during its reconfiguration,” Mr Mboweni said.
The South African rand fell more than two per cent against the US dollar as the bailout was announced. The currency has dropped almost 7 per cent this month after a rally in January.
Eskom imposed its most severe rolling blackouts in years this month as a long financial crisis at the utility grew acute, throttling Africa’s most industrialised economy which receives nearly all of its power from its ageing coal-fired plants.
The risk of Eskom’s collapse is seen as the biggest threat to South Africa’s stretched public finances as most of its debt is state-guaranteed.
But without a plan to control Eskom’s rising costs a bailout could also imperil the country’s last remaining investment-grade credit rating, bestowed by Moody’s.
