Finance minister Enoch Godongwana is expected to announce a plan to take on part of power utility Eskom’s mammoth debt in his mid-term budget on Wednesday, although analysts say the legally complex transfer will take time to execute.
State-owned Eskom has been mired in financial crisis for years and has a roughly R400-billion in debt it cannot afford to service.
It has required recurring government bailouts that have placed public finances under huge strain, with officials grappling with different ways to solve the problem.
Economists say a large portion of Eskom’s debt needs to be absorbed by the state to make it financially stable.
“Anything less than R150-billion would be deemed insufficient,” said Isaah Mhlanga, chief economist at Alexforbes.
BNP Paribas analysts said getting bondholder buy-in for the debt transfer would be critical.
Overall, analysts expect the government to stick to a conservative fiscal policy, as economic growth is expected to remain weak in the coming years and global financing conditions are seen tightening.
“We expect the fiscal consolidation strategy to be sustained, providing fiscal certainty and sustainability,” local bank FNB said in a research note. — (c) 2022 Reuters