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Masondo suggests R146bn of SA debt be forgiven

As a ‘complementary transaction’ to help Eskom transition from the use of coal.
Deputy Finance Minister David Masondo describes the idea as a debt-for-climate swap. Image: Dwayne Senior/Bloomberg

David Masondo, South Africa’s deputy finance minister, has suggested that investors forgive about R146 billion ($10.2 billion) of sovereign debt in exchange for the national power utility meeting climate targets.

In order to transition from the use of coal to generate electricity to renewable energy Eskom will need to borrow about R400 billion, equal to its current debt, and will need a “complementary transaction” to achieve that, he said in a speech on Tuesday.

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Under Masondo’s proposal, which he termed a debt-for-climate-swap, a portion of national debt, which he suggested could be R146 billion, would be forgiven by new or existing creditors.

In exchange South Africa would pledge an equivalent amount as an equity injection into Eskom, conditional on it closing down coal-fired plants, and as guarantees for further borrowing, he said.

Some of the money could also be used to cushion communities from the impact of the coal plant closures, he said.

Masondo first raised the possibility of forgiveness to solve Eskom’s debt problem on July 30. He gave little detail at the time.

“It seems very dangerous for someone at the head of National Treasury to be talking about sovereign debt forgiveness,” said Peter Attard Montalto, head of Capital Markets research at Intellidex. Private investors are “unable to undertake this given their fiduciary duty as they get nothing to fill the hole that would be left,” he said.

© 2021 Bloomberg L.P.

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Well. If you are a private investor that invested in Eskom you might not be very happy with this proposal.
And closing coal fired power stations? That is not going to happen.

Haircut incoming it seems.

Anything and everything else but recover misused Tax money.

Has anyone paid back the money from fraudulent tenders/deals? NO

And they never will

Coal fired power stations WILL be closed, decommissioned. Maybe not at the rate it should happen, but it is just unavoidable.
RE is just so much more affordable, and issues of storage and intermittency ARE being solved in many places. It is just a matter of financial, economic prudence, besides better for our planet, and local environment.
That all does not mean I agree with begging for debt forgiveness. Unfortunately the SA taxpayers, electricity users will have the bear that brunt.

Bwahahaha, a perfect balanced score. 3-3, a draw.
Could anybody of the downvoters provide any solid, reasonable arguments ?
MW readers and commenters show their deeply seated, stubborn ignorance on energy matters, again and AGAIN. The sector is moving at an incredible pace, and they are surely not aware of it. Coal fired power and mines are dead assets.
https://m.youtube.com/watch?v=UQv7Tr8HbGE

Watch Michael Moore’s latest documentary “Planet of the humans” and you will see that when it comes to renewable energy, the emperor has no clothes. It is all a farce. Renewables are not cheaper and often use as much carbon in the production and to run like the mirror farms. The difficulty is getting hold of the documentary because Big Brother decides what is politically correct and serves its Master’s agenda. It was on Youtube for a short while before being taken down. Just like Trump was banned from Twitter because he was not toeing the line.

@jnrb, sorry cannot reply to you directly. Thanks for the effort to come with a reasonable argument why we shouldn’t phase out coal fired power ASAP. I surely read about this MM documentary, but never watched it completely. It is still available on YT, and maybe this weekend I should try to make time for the whole 1h40 mins of it. Found just rather negative comments about it by energy experts I trust. The argument that you use a lot of dirty energy to build renewable energy generation capacity has long been debunked. And it has only some validity, because existing electricity production is still for a large part from coal, gas and nuclear.
The UK hardly uses coal anymore, but still considerable gas. It is already for more than 30% relying on wind turbines, on average. During windy periods that rises above 60%.

Just another of the “leaders” fools not being supervised.

HaHAha!!! one can just shakes ones head!

One man’s debt is another man’s asset.

Debt forgiveness implies asset confiscation and is tantamount to the nationalization of private property. Who should forgive the debt, and donate the value of his investment to Eskom? A member of the GEPF, a private investor, or a German pension fund member? How will they identify the person who is expected to forgive his loan to Eskom? What will happen to the living standard of this individual who donates the value of his loan to Eskom?

One last question – Is Masondo willing to donate the value of the Eskom bonds that are held on his behalf in his pension fund at the GEPF?

These socialists always act very benevolently with other people’s money, never their own. Naive and ignorant losers!

I beg to differ with your assessment “Naive and ignorant losers!” They, the ANC cadre-clique of F&F – Family and Friends – are cunning, manipulative, innovative and essentially self-serving dregs of society.

ANC politicians: beggars and thieves, to a man.
Minister, I and “my ilk” – as your colleagues love to refer to minorities – have contributed countless billions to the fiscus over the years. Seeing as you want to set the precedent, perhaps it is time to forgive us our “debts”?

Just claw-back some of the billions expatriated by the Guptas and does this amount reflect the electricity Soweto got for free?

Yes, Eskom wrote off R5 Billion for Soweto the other day.

Why do some people have to pay and others not?

Because they vote for you?

Realistically let’s say that the investors did agree to the debt forgiveness, what about the new borrowing of R400Bil? That is surely not going to come at Zero Interest, in fact me thinks that it will have a premium price tag so as to factor in the next potential debt forgiveness.

Better yet, if investors do start a debt forgiveness then the socialist state will come begging for more and more until the voters too start asking eventually demanding debt forgiveness and so the rating agencies will keep marking us down.

Call me a pessimist, but I’ve seen this play our in Argentina and well they just stop paying and now cannot even get bailed out by the IMF.

A pessimist is just an optimist with experience.

There is a new asset class (based on Citywire article):

‘Litigation finance is an emerging asset class that bears no correlation to market or macro movements. In addition, most litigation funding is done on a case-by-case basis – allowing investors to gain exposure to different types of legal cases, claimants and defendants, as well as jurisdictions.’

Eskom + Gupta’s could be an opportunity for some investors to recover the funds and get a share.

Just like a farm laborer begging to have his last R100 rand debt scrapped. Only difference is the suit. You make the debt, you pay the debt.

seems to me here we have another minister, like the previous president, who can not distinguish between millions and billions – what does he actually think of the R146billion creditors financial position? – just simply allow it as a gift to a corrupt to the core government?? – if i was in his position, i would not even mentioned such an idea just for the sake of my own dignity

I hope the bank will right off the debt on diesel SUV if I promise to by a Hybrid !! Fat chance …..

Somehow this does not seem right. How did we get into a position that we need to seek forgiveness for not able to pay back debt. What will stop our dear leaders from continuing to be irresponsible and wasteful with the money being borrowed to them by others including tax payer money.

The usual complementary action in such a situation is foreclosure. Normally a bad thing for the indebted, but if investors would attach R146bn of Eskom’s power station assets, that could be a win for all.

And this man is the Deputy minister of Finance? One of the most important portfolio’s in the entire Cabinet. No wonder SA is in Junk status. We are there because of people like him, not being able to think logically and along financial lines.

Another ill advised proposal from an ANC minister which S&P, Moodys, etc will no doubt incorporate in their next rating review of SA sovereign debt

What? We forgive the loans and they forgive the misappropriation. Unbelievabl.

Yes! Apartheid debts were not forgiven! Why should these be!

What does national debt have to do with Eskoms debt or my debt?

Lol you think SA (and therefore you) has not guaranteed that debt? If Eskom defaults properly, you are all finished.

Obviously. How do you understand so little?

Is this a tax free donation?

Did this man go to the Business school of Robert Mugabe? Disgrace!

You already borrowed money and promised to repay it but you didn’t keep your promise. Now you make another promise which you likely won’t keep as well. How can you insult people’s intelligence like that and expect them not to feel offended?

Mmmmm … I get something, you get nothing. That should be above the entrance to Luthuli House.

End of comments.

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