South Africa: Eskom's Debt Is a Double-Edged Sword

Beaufort West, Western Cape province: Electricity pylons.
analysis

The dilemma surrounding the government's bid to restructure Eskom: Either the state puts pensioners' retirement savings on the line, or a critical state utility faces the prospect of failure.

Public Enterprises Minister Pravin Gordhan remains silent about details of the government's intentions to recapitalise Eskom after signing a social compact on behalf of government with unions and business to save Eskom from collapse. Could the government finally be on the way to getting its hands on SA's retirement savings to rescue the ailing utility?

One of the government's biggest challenges - and one seemingly impossible to fix - is Eskom's unprecedented R480-billion debt. The debt has not only been a drag on consumers who have had to endure inflation-plus tariff increases for electricity for more than a decade, but is exacerbating the instability of Eskom's old generation fleet. With poor maintenance and over-reliance on open-cycle gas turbines, which operate on (expensive) diesel, Eskom's power plants are running at full capacity on average only eight months of the year.

Against this backdrop, Eskom may be given a lifeline after talks between government, business, labour and civil society, culminating in a "social compact" which was signed by all parties on 8 November...

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