South Africa Reduces Eskom’s Debt Relief Package and Shifts to Loans

South Africa reduces Eskom’s debt relief package by R20-billion, transitioning to loans instead of debt assumption. National treasury cited Eskom’s improved financial position as a reason for this change. Eskom expects to be profitable by 2025, while government loans amount to R230-billion over five years, R24-billion less than initially anticipated. Eskom’s ongoing reliance on bailouts has led to power cuts affecting economic growth.

The government of South Africa has decided to further reduce its debt relief package for Eskom, its state-owned power utility, by an additional R20-billion. Rather than taking on the utility’s debt directly, the support will primarily be provided in the form of loans. According to the national treasury, this adjustment reflects Eskom’s improved financial status since the initial announcement in 2023.

In the latest budget revision, it was indicated that instead of assuming R70-billion of Eskom’s debt, the national treasury will now extend R50-billion in loans to the utility. This decision follows a prior R4-billion reduction in support due to Eskom’s failure to meet a deadline for selling its Eskom Finance Company.

Eskom anticipates achieving profitability by 2025, marking its first profit in eight years. Over a five-year period, the government will have committed R230-billion in loans to aid Eskom in managing its debt, which is R24-billion less than originally projected.

The ongoing financial struggles of Eskom have led to severe rolling power cuts for over a decade, significantly impacting South Africa’s economic growth. The efforts to reform Eskom continue amidst these challenges, with the utility relying heavily on government bailouts.

In conclusion, the South African government’s revised debt relief package for Eskom reflects an effort to provide financial support while minimizing direct debt assumption. The transition to loans indicates a cautious approach in light of Eskom’s expected improvements towards profitability by 2025. However, the longstanding issues of power cuts and reliance on bailouts underscore the complexity of Eskom’s financial recovery.

Original Source: techcentral.co.za