(Bloomberg) — South African Finance Minister Enoch Godongwana ruled out additional state funding for debt-laden power utility Eskom Holdings SOC Ltd., underscoring the government’s disjointed approach to resolving the nation’s debilitating energy crisis.
“From where I sit, the utility does not require any further cash injection,” Godongwana said in an interview at the International Monetary Fund’s Spring Meetings in Washington on Friday.
Godongwana’s comments came after newly appointed Electricity Minister Kgosientsho Ramokgopa called for more fiscal support for the company that’s survived on government bailouts since 2008, when it started imposing rolling blackouts that are hobbling Africa’s most industrialized economy. Eskom has subjected the country to blackouts for all but one 24-hour cycle this year as its poorly maintained coal-fired fleet struggles to meet demand.
In February, Godongwana announced a 254 billion-rand ($14 billion) debt-relief package for Eskom, while affirming the National Treasury’s commitment to reining in government debt and reducing budget deficits.
The plan, which enables the utility to undertake critical maintenance needed to secure electricity supply, hinges on meeting pre-determined performance targets that are meant to wean Eskom off its reliability on public finances. Straying from that strategy would test the credibility of South Africa’s fiscal framework and budget processes in a country with a full house of junk credit ratings.
Deviations would also rattle investors who have placed a premium on the currency because of the slow pace of economic reforms, severe power rationing and logistics-network constraints that are eroding the nation’s growth prospects, disrupting local supply chains and stoking inflation. The rand has weakened 7.6% against the dollar this year, making it the second-worst performer in a basket of 16 major currencies tracked by Bloomberg.
South Africa’s government is facing sharp criticism over its handling of the energy crisis that’s set to intensify during the looming winter months. While President Cyril Ramaphosa has introduced a series of measures, including incentives for businesses and households to self-generate power, it will take time for electricity supply to materially improve.
Last week, the government decided on two controversial measures — a state of disaster over the electricity crisis and a rule that temporarily exempted Eskom from disclosing irregular, fruitless and wasteful spending — after a public outcry. Eskom was a hard-hit during an era of graft, known locally as state capture. The creation of an electricity portfolio in the presidency also raised concerns about the multiplicity of ministries that Eskom now reports to.
Godongwana said that while rising debt-service costs in South Africa are a concern — they account for about 20% of main budget revenue and crowd out spending on healthcare and education — he remains confident that the government can manage its debt load.
“I am quite comfortable about managing those that increase,” he said. “My worry is that they are crowding out other expenses.”