South Africa: A Hare-Brained Rescue Option to Restructure Eskom

opinion

Reports that the chairman of the Public Investment Commission, Dr Reuel Khoza has submitted a proposal to convert R90-billion of Eskom debt into equity are hardly new. They are scary, but not novel.

In mid-2019, a proposal by the biggest owner of Eskom's debt, the Public Investment Corporation (PIC), to convert its R90-billion holding into equity was touted as a hare-brained rescue option to restructure the troubled power utility that was largely responsible for bringing SA Inc. to the edge of the fiscal cliff.

Then came Covid-19 with additional pressures on the economy, and now the same madness has resurfaced. It was hardly a bold bid by the audacious then and now, it's more like the last throw of the desperate.

In the event of this madness coming to pass, the PIC, which manages about R2.2-trillion and is responsible for the pensions of more than a million state workers, will end up owning equity for which there is no active market and which no one else wants. In return, they would presumably get a say over Eskom's messy finances, including board representation.

The questions, apart from the plain fact that this would be entering an unacceptably risky swap, are: Does...

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