Fitch Ratings Ltd. said that while South Africa\u2019s worsening debt forecasts don\u2019t include the threats posed by the state taking on any of the embattled power utility\u2019s R450 billion ($30 billion) of debt, any risks posed by this are reflected in the nation\u2019s current credit assessment.<\/p>\n
Finance Minister Tito Mboweni presented a rapidly deteriorating outlook in his medium-term budget policy statement on Wednesday, with gross government debt seen surging to 80.9% of gross domestic product in the 2028 fiscal year unless urgent action is taken.<\/p>\n
The trajectory is almost 20 percentage points higher than forecast in the February budget and shows no sign of stabilizing.<\/p>\n
Eskom isn\u2019t generating enough income to cover interest payments on its debt and is struggling to produce enough power to meet demand.<\/p>\n
The utility supplies about 95% of the nation\u2019s electricity and the government has said it\u2019s too big and important to fail.<\/p>\n
The Finance Ministry is examining options on the probability of the state taking on some of the debt and is in talks with lenders about this, Public Enterprises Minister Pravin Gordhan said Thursday.<\/p>\n
\u201cA clear path toward debt stabilization is still missing,\u201d Fitch said in an emailed statement.<\/p>\n
\u201cFailure to stabilize the debt-to-GDP ratio over the medium term is a negative rating sensitivity.\u201d<\/p>\n
Fitch in July reduced its outlook on South Africa\u2019s BB+ rating to negative. This usually indicates that the next move could be a downgrade.<\/p>\n
Fitch cut the nation\u2019s assessment to junk in 2017, leaving Moody\u2019s Investors Service as the only major credit-rating company with an investment-grade reading for South Africa.<\/p>\n
The utility says it has about 16,000 more workers than it needs, but labour unions allied to the ruling African National Congress oppose any move to reduce staff numbers. Gordhan said the producer can be fixed without cutting staff drastically.<\/p>\n