Eskom cuts its crippling debt by 20 percent

Struggling South African state power utility Eskom Holdings SOC reduced its debt by almost a fifth after repaying matured loans and benefiting from a more favourable exchange rate, Public Enterprises Minister Pravin Gordhan said. Debt fell to R401-billion ($29-billion) at the end of March, from R484-billion a year earlier, Gordhan said in a webcast speech to legislators on Tuesday.

“The management of Eskom’s debt is one of the key priorities to return the entity onto a sustainable path,” Gordhan said. “The entity is continuing to implement its cost-reduction initiative, with a saving of 13.5 billion rand achieved in the 2021 financial year.”

Eskom has not been generating enough electricity to meet the nation’s needs, resulting in intermittent power shortages, and is not generating enough cash to cover its operating expenses and interest bill, leaving it dependent on government bailouts to survive.

Eskom’s debt is considered one of the biggest threats to the nation’s economy, missing several self-imposed deadlines for its reorganization. The issue is still being dealt with and “is an interactive process between Eskom, the Department of Public Enterprises and other parties such as the Public Investment Corporation,” Gordhan told reporters. “There are some concrete proposals on the table, but due to Covid and other restrictions we haven’t moved as quickly as we wanted to. The plan is to ultimately move to a sustainable debt solution for Eskom.”

Gordhan has said the ministry wants to split Eskom into generation, transmission and distribution units, which will make it easier to manage. The units will start functioning separately and have their own boards, managing directors and profit-and-loss accounts by the end of June. The legal separation of the transmission company will be completed by the end of this year, and the other two units by the end of 2022, he said.