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Fixing Eskom is complex, will take time – Moody’s

The ratings agency will be able to better judge SA’s fiscal and economic outlook once the long-term plan for Eskom is known.
Fixing loss-making power utility Eskom is complex and it will take time for the government and the company to agree to a plan, according to Moody’s Investors Service.

The energy firm, which supplies about 95% of the country’s power, has about R440 billion of debt and is surviving on state bailouts after massive cost overruns at two partially completed coal-fired plants. While the government has proposed splitting it into three units and a policy paper by the National Treasury proposes selling coal-fired power plants, no strategy to stabilise its finances has been published yet.

“For us, there will be only one plan and that will be the one that both the government and the company agreed to,” Lucie Villa, Moody’s vice president and lead sovereign analyst for South Africa, said on Monday. “Knowing the complexity of the issue, we know first that it will be an iterative process and that it takes time. So our view has been that is takes more than a few months to sort out certain issues.”

The government’s proposed R128 billion in assistance over three years will add to state liabilities and widen the fiscal deficit, she said, without giving an estimate.

Moody’s is the only major ratings company that still assesses South Africa’s debt at investment grade. While it has a stable outlook on the Baa3 rating, one level above junk, analysts are speculating that it’s at risk of a downgrade given weak economic growth and rising debt.

A downgrade would leave South Africa without any investment-grade credit rating for the first time in 25 years. It would also see the country fall out of key bond indexes including the FTSE World Government Bond Index prompting outflows.

The budget shortfall is expected to climb to more than the 4.5% of GDP forecast in the budget this fiscal year, with Fitch Ratings projecting the gap at 6.3% of GDP. That would be the biggest deficit in a decade.

While Moody’s hasn’t published new forecasts for South Africa, it has said failure to implement policies to narrow the gap could push the debt-to-GDP ratio, including guarantees to Eskom, above 70% in the “medium term.”

Moody’s will be able to better judge South Africa’s fiscal and economic outlook once the long-term plan for Eskom is known, Villa said. The company is looking for a balance between credible fiscal and debt numbers and detail on policy decisions in the medium-term budget statement, she said.

While South Africa’s economic and fiscal strength is eroding, it has credible institutions and a robust macroeconomic policy framework, Villa said.

“We think the institutions are well equipped to address that deterioration and to arrest it,” she said, adding that the new administration has the political will to implement policies.

Finance Minister Tito Mboweni is due to present the mid-term budget in late October, just weeks before Moody’s is scheduled to publish its next assessment on November 1.

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Give me some of what they are smoking.. Fix Eksdom? Please, pull the other one.
“We think the institutions are well equipped to address that deterioration and to arrest it”… What? Do they honestly expect us to believe this tripe?

Do not agree.
Fixing Eskom, requires stern action, and guts;
1. Reduce staff by 50 % .
2. Install competent Management.
3. No Government interference.
See, that was easy. I can see them flourishing already.

TaffeeDee, you are now arguing like a rational, intelligent and educated person who can connect the dots. However, it doesn’t work like that since two things rule supreme in Africa: (1) a complete absence of personal accountability and (2) an irrational conviction that collectivism solves everything. Collectivism solves nothing, it only creates places to hide. Eskom is a failure on such a grand scale that it is impossible to assign the blame to anyone specific. It therefore provides plenty of places for those seeking to hide their ill gotten gains.

SA CDS spread puts SA debt below investment grade as does S&P and Fitch
So the market and other agencies are incorrect and Moodys is correct?

What happened to Cyril’s economic plan or whatever it was he was supposed to ‘reveal’?

His plan is EWC, stealing our pensions and taking away our medical aid (for starters).

That’s the New Dawn.

Just do as treasury suggested and sell Eskom’s power stations to the private sector, there we go, quick fix!

…I can’t see any private conglomerate to willingly buy out R500bn in debt?

(R500bn is the equivalent production cost of SEVEN US Navy Nimitz-class aircraft carriers.) SA certainly had plenty of money to waste…..

CR was in charge of the war room that was sup[posed to fix ESkom, this is now 7 years ago.
What did he do? Nothing, any business man with balls would have sorted it out, this is proof he cannot even run the businesses he was given. His own personal stuff, so we know what he will do with SA.

OR was he told to do nothing by Zuma??? If so then he is the puppet we think he is.

Here’s the anc’s plan Moody….rappe the capitalist, free market taxpayers, over and over again until they too are bankrupt!

Open your eyes Moody and stop playing fast and loose with our economy and your evident and unfounded opinion on the anc’s “competencies “…. It should be clear to you by now they just don’t have a clue and you’re only encouraging them and their blind stupidity and racially exclusive economic policies!

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