Government weighs new support measures for struggling Eskom

Government is weighing additional options to support Eskom, including swapping the state power firm’s debt for government bonds and moving it to a special purpose vehicle, a senior official said.

Discussions are at an early stage, and it is not yet clear which option will be chosen to help Eskom, whose finances are in crisis and which has this year implemented rolling power cuts across the country that have hurt local businesses.

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President Cyril Ramaphosa has already pledged R230 billion of financial support for Eskom over the next 10 years, but officials say other steps will be needed to make it financially sustainable.

Ian Stuart, acting deputy director general for National Treasury’s budget office, said the issue was “large and complex”.

“We are looking at which option is best both in terms of fiscal costs and support for the reform process,” he told Reuters.

Support could take the form of ongoing subsidies or the firm’s debt could be moved off its balance sheet to the government or into a special purpose vehicle.

“A switch to South African government bonds will be looked at, but we have to confirm the legalities of each option and implications for ratings agencies.”

South Africa’s last investment grade credit rating, from Moody’s, is hanging by a thread.

Ramaphosa’s government has sought to reassure Moody’s and other ratings agencies that it has a credible plan to rescue Eskom without putting the country’s public finances at risk.