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<\/a><\/p>\nEskom, which supplies about 95% of the country\u2019s power, has R450 billion ($30.5 billion) of debt and is surviving on state bailouts after massive cost overruns at two partially completed coal-fired power plants.<\/p>\n
The country endured four days of controlled blackouts last week to prevent total collapse of the grid.<\/p>\n
Power shortages and policy uncertainty have damped economic growth and plunged business confidence to multi-decade lows as investors await the government\u2019s turnaround plan for the utility.<\/p>\n
“These outages threaten South Africa\u2019s fragile growth profile,”Siobhan Redford, a Johannesburg-based analyst at Firstrand Bank Ltd., said in a client note.<\/p>\n
“Clarity and certainty on plans for Eskom — both in terms of financing needs and returning to a more sustainable power generation profile — are vital in boosting the confidence of both domestic and offshore investors.\u201d<\/p>\n
South Africa will \u201csoon\u201d announce the appointment of a permanent chief executive officer for the utility and \u201cshortly\u201d release a special paper on the path the CEO and a strengthened board should take, President Cyril Ramaphosa said in a statement on Monday, in which he described Eskom\u2019s financial situation as\u00a0\u201cuntenable.\u201d<\/p>\n
\u201cThe sheer scale of Eskom\u2019s debt is daunting,\u201d Ramaphosa said. \u201cFurther bailouts are putting pressure on an already constrained fiscus.\u201d<\/p>\n
Lingering Uncertainty<\/strong><\/p>\n The bailouts will probably widen South Africa\u2019s budget deficit to the biggest since the financial crisis, threatening the country\u2019s last remaining investment-grade credit rating at Moody\u2019s Investors Service, according to a\u00a0Bloomberg survey\u00a0of economists.<\/p>\n Moody\u2019s is scheduled to review the assessment on Nov. 1, days after the mid-term budget is presented to lawmakers.<\/p>\n A risk premium was priced into the rand and local debt partly due to weak economic fundamentals and uncertainty on the future of Eskom, the medium-term budget policy statement and the credit assessment from Moody\u2019s, said Elna Moolman, a Johannesburg-based economist at Standard Bank.<\/p>\n Last week, the government published its latest Integrated Resource Plan, which maps out the energy mix for the next decade.<\/p>\n It includes a switch to more green energy as the country, which sources most of its electricity from coal, faces pressure to meet emissions-reduction targets.<\/p>\n South Africa will develop a framework to take ageing coal-fired plants out of service, Ramaphosa said.<\/p>\n While this will present challenges for communities and workers where fossil fuel-powered energy generation takes place, \u201cit also presents opportunities for those affected to have access to technologies that are more cost-effective and better for human health.\u201d<\/p>\n The rand was little changed at R14.78 per dollar by 12h52 in Johannesburg. Yields on benchmark 2030 government bonds climbed four basis points to 8.97%.<\/p>\n
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