South Africa: Eskom, Tariffs, Bailouts and IPPs - Let's Cut Through the Chaos

opinion

Almost every South African knows that Eskom is in a dire state and that its parlous financials threaten to drag the country down with it. On a very basic level, there are only two ways out of the immediate problem - much higher than inflation tariff increases or a very large bailout by the taxpayer. What we will get is a combination of both. There is no other way out of this awful situation.

As a vertically integrated monopoly that has operated without any oversight, it appears nobody, including the government shareholder via the Department of Public Enterprises, really understands what has gone wrong or why it has gone wrong. The result has been metastasising cancer in a critical part of the economy upon which each of us living in this country depends.

For some time, the ability of Eskom's management to raise ever more debt, based on government guarantees, was celebrated as some sort of achievement. Well, the indebtedness at over R440-billion (about R7,700 for every South African) is so high that Eskom's operational profits are insufficient to service its debt. That is not all. Eskom's own view is that it needs to raise another R160-billion just to complete...

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