SOUTH Africa’s state-owned asset manager, Public Investment Corporation (PIC), would have to ensure Eskom could produce sufficiently strong enough earnings before falling in with a proposal to swap its current debt to the utility to equity.
This is the view of David Masondo, South Africa’s deputy finance minister, who was speaking to City Press in a report published by Bloomberg News.
Masondo said the PIC had to ensure that Eskom’s earnings and dividend payments exceeded the interest it would earn supplying R92bn in debt to the power utility which is currently struggling to meet South African electricity demand.
The debt-to-equity proposal was made by unions and had “the potential to work”, Masondo told City Press. “The PIC must ensure that the expected dividend earnings will be reasonably higher than the current interest earned on their loans,” Masondo said.
“Eskom must meet certain conditions if converting PIC debt to equity is to be successful and sustainable.”
Eskom, which supplies almost all of South Africa’s power, has about R450bn in debt and its revenue doesn’t match service costs, said Bloomberg News. A proposal that the fund manager, which manages over R2 trillion, take a stake in the utility, was submitted to treasury this year, the PIC chairman Reuel Khoza said in June.
Eskom cut 2,000MW from the national grid on Monday as it battles to stabilise generation capacity affected by plant breakdowns.
Power cuts are likely to continue during the week as demand rises. The utility, which started rationing electricity on Friday, hasn’t made sufficient progress to get additional power generation units back online, it said in a statement.
“During the coming week Eskom will continue to experience supply constraints,” according to the statement cited by Bloomberg. “Due to the much colder weather, demand for electricity has also risen significantly.”