Cash-strapped South African utility Eskom would have defaulted on its debts without a R5 billion ($420 million) loan last week from the country’s Public Investment Corporation (PIC), the fund said on Tuesday.
The PIC, which holds a large chunk of government bonds and stakes in leading South African companies and ranks as Africa’s biggest investment fund, gave the country’s sole power supplier the loan to help fund its operations in February.
Eskom, which has been facing serious liquidity issues, is emerging from a leadership crisis and appointed a new board of directors last month.
“Without this investment, Eskom would have been unable to service its debt, which would have led to a default and the breaking of its debt covenants with financial institutions during the first week of February 2018,” the PIC said in a statement.
The PIC said if Eskom defaulted it would have resulted in “catastrophic consequences” for the domestic economy.
The loan given on behalf of the Government Employees Pension Fund is fully backed by a government guarantee and is to be settled in 30 days, the PIC said.
($1 = R11.90)