Taxpayers have footed nearly R700bn excluding government guarantees in bailing out ailing state-owned enterprises (SOEs) since 2013.
This is according to data collated by asset management firm Anchor Capital, which expects further support for Eskom.
Casey Sprake, a fixed-income investment analyst at Anchor Capital, said Eskom’s debt relief and financial outlook remained a key concern for financial markets.
She said over the past 12 years, government bailouts for SOEs, excluding government guarantees, have totalled R659bn — including the February 2023 Eskom debt relief package — equating to nearly 1% of GDP per annum.
“Eskom’s operational performance has shown improvement, and the utility currently faces no immediate refinancing risk. However, municipal debt continues to rise at an unsustainable pace (municipal debt owed to Eskom has now surpassed R100bn), further straining the utility’s financial position,” Sprake said.
“At the same time, maintenance and capital expenditure demands place ongoing pressure on the utility’s financial position. Thus, Eskom’s long-term viability remains at risk unless decisive action is taken to reduce costs and address municipalities’ escalating payment arrears,” she said.
“Without meaningful intervention, the growing debt burden could undermine the utility’s financial recovery efforts and worsen broader fiscal pressures. As such, despite the relief package, Eskom will likely require interim financial support beyond 2026 until it returns to profitability.”
Two years ago the government approved a R254bn relief package for the power utility. Eskom has since turned around its operational performance and has kept the lights on for nearly a year — bar for two days this month.
However, its financial future is at risk from ballooning municipal debt. Eskom chair Mteto Nyati has warned that runaway municipal debt, which topped the R100bn mark, risks delaying the unbundling of the utility’s distribution unit, potentially putting into question the viability of the distribution arm.
Municipalities owe Eskom a staggering R109.4bn, more than an 18-fold jump in unpaid electricity bills since 2015 when they owed just less than R5bn.
The business community is looking for the National Treasury, through Wednesday’s budget speech, to divulge what its plans for Eskom and Transnet are — the two key SOEs at the heart of the government’s reform agenda.
“Treasury will need to set out how it plans to deal with the financial challenges facing Transnet and Eskom. Eskom still needs to fix its debt-burdened balance sheet, which is substantially compromised by municipalities that continue to grow their arrears,” Business Leadership SA CEO Busisiwe Mavuso said in her weekly newsletter.
“Transnet must invest in infrastructure, though much can be done with accelerated deals with the private sector, especially through concessions, saving the public purse. Other perennially failing SOEs like the Post Office and Denel are not worth more public bailouts.”
Sprake said Eskom’s debt swap may be converted into a loan spread over the forecast period.
“The additional spending pressures, coupled with the likely conversion of Eskom’s debt swap into a loan, must be balanced against available funding sources. However, National Treasury’s expected overfunding in the bond market should help mitigate these pressures.”
Transnet has asked the Treasury for a R50bn bailout, testing the government’s resolve to not give further bailouts to SOEs, as outlined in the medium-term budget policy statement in October.
In December 2023, the Treasury awarded Transnet a R47bn government guarantee to provide market confidence so that private sector capital would flow to the entity as it was key to SA’s trade with the rest of the world.
Transnet has, however, so far failed to convince the government to provide it with an equity injection and take a portion of its debt — like it did with Eskom.
Izak Odendaal, investment strategist at Old Mutual, said the government’s spending pressures, which range from social security to student funding and SOE bailouts, aren’t going away.
One of the key things investors will look out for this week is whether there will be support for Transnet, which is struggling to meet interest payments on its R130bn debt pile. Similarly, municipalities owe various utilities billions of rand.
— Izak Odendaal, investment strategist at Old Mutual
“One of the key things investors will look out for this week is whether there will be support for Transnet, which is struggling to meet interest payments on its R130bn debt pile. Similarly, municipalities owe various utilities billions of rand,” he said.
The Black Business Council (BBC) said it hoped Enoch Godongwana would not be “bullied” when it comes to funding the Transformation Fund announced by the president in the state of the nation address.
“As such, the minister should continue to work on reducing our debt and interest payment over the medium-to-long term, preparing the country towards self-reliance,” said BCC CEO Kganki Matabane.
“In particular, we expect the following: Increase spending on infrastructure to invigorate the economy and create sustainable jobs (not job opportunities). Put R10bn in seed funding into the R100bn Transformation Fund envisaged by President Ramaphosa and minister Parks Tau,” he said.
“Fund Eskom and Transnet, as they are too big to fail. He should put stern conditions on that funding to ensure that they
deliver on their mandates and work towards profitability and self-funding.”
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