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South Africa takes over part of Eskom’s debt

The South African government announced on Wednesday that it would take over part of the huge debt of the state-owned energy company Eskom.

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The South African government announced on Wednesday that it would take over part of the huge debt of the state-owned energy company Eskom, which it says poses the greatest risk to the economy, as well as measures to limit inflation.

Finance Minister Enoch Godongwana, in a budget speech to Parliament, explained that the state would take over part of Eskom’s $22 billion debt to ensure its long-term financial viability and enable it to stop relying on government bailouts.

“The plan will allow Eskom to focus on the performance of its facilities and capital investments,” the minister said, noting that the state would provide the equivalent of $12.5 billion in debt relief for Eskom over the 2019-2026 period.

Eskom’s financial situation has had a direct impact on the electricity bills of South Africans. The company had requested a 20.6% price increase in 2022, but the national energy regulator only approved a 9.61% increase.

Widespread power outages, caused by failures in the aging and poorly maintained infrastructure of the state-owned company that provides almost all of the country’s electricity, are hampering growth, the minister said.

The government has also set a target of reducing inflation to 5.1% in 2023, after the peak of 7.8% recorded in July, the highest in 13 years.

The increase in fuel prices triggered by Russia’s invasion of Ukraine – which has risen by 37.5% so far – and the increase in food prices, which has reached an average of 8.5%, have been “a key source of inflationary pressure,” the minister recalled.

In addition to recurring power outages, Africa’s most industrialized economy has been hampered by a series of shocks that have required urgent allocation of funds, he said, including the damage caused by massive looting during the July 2021 riots and the deadly April floods around Durban (east).

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