{"id":636793,"date":"2022-10-21T11:00:52","date_gmt":"2022-10-21T09:00:52","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=636793"},"modified":"2022-10-21T11:00:52","modified_gmt":"2022-10-21T09:00:52","slug":"eskoms-financial-crisis-these-graphs-show-how-deep-the-troubles-go","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/636793\/eskoms-financial-crisis-these-graphs-show-how-deep-the-troubles-go\/","title":{"rendered":"Eskom’s financial crisis – these graphs show how deep the troubles go"},"content":{"rendered":"

Eskom is in deep financial trouble, with its interest expense far exceeding its operating profit, which shows that it can no longer service its debt.<\/p>\n

Over the last decade, Eskom was plagued by mismanagement, corruption, rising employee expenses, and huge cost overruns on Medupi and Kusile.<\/p>\n

These factors contributed to Eskom racking up huge debt that has reached levels that put the country\u2019s finances under pressure.<\/p>\n

Since 2011, Eskom\u2019s debt has increased at a rapid pace. The power utility\u2019s total liabilities and interest-bearing debt peaked in 2020 at R637 billion and R532 billion, respectively.<\/p>\n

Eskom currently has R566 billion in liabilities, of which R402 billion is interest-bearing debt.<\/p>\n

The debt levels are so unmanageable that Eskom finance head Calib Cassim wants the government to take over R200 billion in debt.<\/p>\n

The graph below shows Eskom\u2019s total liabilities and debt since 2006.<\/p>\n

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Rising debt does not necessarily signal a financial problem. Many companies increase their debt by expanding their profitable operations.<\/p>\n

However, a problem occurs once an organisation\u2019s debt increases while its ability to service its debt deteriorates.<\/p>\n

A company\u2019s ability to service its debt can be determined by comparing its operating profit to the interest expense on its debt.<\/p>\n

In Eskom\u2019s case, its interest expense far exceeded its operating profit over the last four years. It indicates that it can no longer service its debt.<\/p>\n

Eskom\u2019s latest financial report shows that it can only cover 13% of its interest expense with its entire operating profit.<\/p>\n

When an organisation can no longer cover its interest expense, its debt will continuously increase in what is known as a debt trap. It often means companies take out loans to pay off loans.<\/p>\n

The graph below, which shows Eskom\u2019s operating profit and interest expense since 1990, clearly illustrates its dismal financial situation.<\/p>\n

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Read: Sabotage, coal theft and the other high-level crimes rocking Eskom<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Eskom is in deep financial trouble, with its interest expense far exceeding its operating profit, which shows that it can no longer service its debt.<\/p>\n","protected":false},"author":93,"featured_media":75316,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[1164,26],"class_list":["post-636793","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-eskom","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/636793","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/93"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=636793"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/636793\/revisions"}],"predecessor-version":[{"id":636803,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/636793\/revisions\/636803"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/75316"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=636793"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=636793"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=636793"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}