South Africa’s state owned utility, Eskom, has managed to reduce its debt by R83 billion in the 2020/21 financial year, the public enterprises minister Pravin Gordhan announced yesterday. Eskom debt now stands at R401 billion ($29 billion) as of March, from a staggering R484 billion a year earlier. The utility also received R56bn in government support which was crucial in servicing the debt.
The utility is utilising the benefits of exchange rate movements by paying off mature loans, public enterprises minister Pravin Gordhan told parliament on Tuesday
The management of Eskom’s debt is one of the key priorities to return the entity on to a sustainable path
Minister Pravin Gordhan
The reduction of debt by Eskom bodes well for South Africa’s credit rating by the rating agencies as the utility is the biggest threat to South Africa’s fiscal position and economic well being.
Debt recovery and tariff hikes key for Eskom’s debt servicing
Whilst tabling his department’s budget in parliament on Tuesday, minister Pravin Gordhan said Eskom is in the process of recovering money it’s owed by municipalities and clients whilst also recovering money stolen by companies it did business during the state capture era. Pravin Gordhan says Eskom is owed R45.1-billion by its customers.
The National Energy Regulator of South Africa (Nersa) approved a 15% electricity tariff hike which will go a long way in assisting the utility’s financial position.
“The management of Eskom’s debt is one of the key priorities to return the entity on to a sustainable path,” said Gordhan. “The entity is continuing to implement its cost-reduction initiative, with a saving of R13.5bn achieved in the 2021 financial year.”
The state owned utility is currently undergoing restructuring which will result in the company being separated into three units – generation, transmission, and distribution. This is projected to ensure more efficiency in the utility’s operations and put it on a better financial footing.
Eskom also established a Just Energy Transition (JET) office that will oversee the utility’s transition to cleaner energy where it generates electricity from renewable energy sources. With the falling costs of renewable energy technology, generating electricity from renewable energy sources makes financial sense for indebted Eskom.
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