Proudly sponsored by

Eskom unbundling fails to cut solvency risk, Futuregrowth says

‘The core problem of debt’ has yet to be addressed.
Image: Bloomberg

Futuregrowth Asset Management said that despite efforts to make South Africa’s Eskom profitable, including a process of unbundling its divisions into separate entities, “the core problem of debt” has yet to be addressed.

The utility that reported a fourth straight full-year loss on August 31 has very high finance costs on a debt pile of about R400 billion ($28 billion). Eskom expects to separate its transmission division from the utility by the end of the year, with generation and distribution units to follow in 2022.

Moneyweb Insider INSIDERGOLD

Subscribe for full access to all our share and unit trust data tools, our award-winning articles, and support quality journalism in the process.

Choose an option:

R63 per month
R630 per year SAVE R126

You will be redirected to a checkout page.
To view all features and options, click here.

A monthly subscription is charged pro rata, based on the day of purchase. This is non-refundable and includes a R5 once-off sign-up fee.
A yearly subscription is refundable within 14 days of purchase and includes a 365-day membership.

Click here for more information.

“All these interventions do not address Eskom’s core problem: the debt trap,” Sithembiso Garane, Futuregrowth’s head of listed credit, said in a note on Thursday.  “Regardless of the divisionalisation and liberalisation of the energy sector, a debt solution is still required.”

“Primary energy cost pressure and the inability to contain employee costs continue to pose a significant challenge in the utility expenditure reduction program,” Garane wrote.

© 2021 Bloomberg

COMMENTS   4

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.

SIGN IN SIGN UP

There is only one possible solution. Those who benefitted from the debt should pay the debt. The Eskom debt was used for the benefit of Chancellor House who sponsored the ANC, and the Tripartite Alliance who sponsored Cosatu members. All of them belong to the GEPF. That implies that there is only one solution – the GEPF should rescind its Eskom bonds because, in reality, those bonds are worthless already.

That is so kind but rather than teachers, nurses and policemen having to take the knock (and then the taxpayer) it should just be Eskom employees pension fund savings.

Your real message is an old one; the emperor has no clothes but a lot of people pretend that all is well, mostly for their own financial self interests.

So “the core problem of debt” has yet to be addressed.” Isn’t this the basic problem underlying the entire SA economy? From the inability of the ANC to fund their own political party, which has leeched into the general economy, exacerbated by the CORONA-19 pandemic?

And everyday we read of tens of millions of Rands disappearing into the pockets of the cadre-class. But the ignorance or just plain intransigence of the mass of the voting public remains.

Which means that we, the responsible tax, rates and electricity paying public will have to fund this inept and corrupt regime for another 5 years at least.

Unbundling isn’t meant to solve the debt problem.

Unbundling is meant to free consumers from Eskom’s stranglehold on electricity.

It will allow alternative suppliers to use the transmission grid, introducing competition and lowering prices for consumers/business.

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

Podcasts

INSIDER SUBSCRIPTIONS APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING PORTFOLIO TOOL CPD HUB

Follow us:

Search Articles:
Click a Company: