Eskom Debt Swap Not an Option – Ramaphosa
South Africa’s President, Cyril Ramaphosa on Thursday said that debt swap for cash-strapped state power company Eskom would coil the country into more debt.
He noted the need to look at other options to shore up the company’s balance sheet.
Eskom, which has had to implement power cuts due to coal shortages and poor plant performance, said last week it wants the government to take on 100 billion rand ($7 billion) of its debts, about a quarter of its total borrowings of 420 billion rand.
Ramaphosa in an interview said “The debt swap that Eskom has come up with is just going to descend us into further deeper debt as a country, so we have said we need to look at other options.”
“Eskom is very important for the life of our country and tomorrow I will be announcing a task team that will be looking at Eskom in terms of the current difficulties.”
Ramaphosa said the team would, among other things, look into Eskom’s business and funding model and how the power utility should be structured.
Eskom supplies more than 90 per cent of the country’s power.
Moving Eskom’s debt to the government’s balance sheet put South Africa’s sovereign credit ratings under pressure.
Moody’s is the last of the “big three” ratings agencies to have South Africa’s debt in investment grade, with S&P Global Ratings and Fitch rating South African debt as sub-investment grade.
Ramaphosa concluded “We are working very hard to upgrade ourselves and improve our investment rating. We want to get out of this downgrade situation.”