Eskom Holdings SOC Ltd., the state-owned South African power utility with about $30 billion of debt, sought advisers on how to implement a government bailout seven months after President Cyril Ramaphosa said the company would be reorganized, Bloomberg News reported. Eskom issued an invitation to tender for “financial services for implementation for government support package” on Aug. 23, according to a document seen by Bloomberg. The tender, which closed on Sept.
Investors may be forgiven for wondering what’s taking Moody’s Investors Service so long to downgrade South Africa to junk, Bloomberg News reported. Financial markets have been pricing in a downgrade for months, and the two other major rating companies have had South Africa on junk for two years. Yet Moody’s said this week South Africa’s investment rating is probably safe for another 12 to 18 months and President Cyril Ramaphosa’s government needs time to implement economic reforms, including fixing the loss-making power utility Eskom Holdings SOC Ltd.
South Africa’s unsecured lending boom has left 40% of borrowers in default and millions of people in a debt trap, according to fund manager Differential Capital, Bloomberg News reported. About 7.8 million of the country’s 60 million residents have taken out a combined 225 billion rand ($15 billion) of loans without collateral, mostly for short-term needs such as furniture and urgent family care, the Johannesburg-based firm said in a report. South Africa eased controls on unsecured lending in 2007 to boost financial inclusion in one of the world’s most unequal nations.
South Africa’s struggling state-owned defense company Denelaims to begin disposing of equity stakes and exiting loss-making businesses within months as part of its turnaround strategy, it told a parliamentary committee, Reuters reported. Denel, which makes ammunition, missiles and armored vehicles for South Africa and customers elsewhere in Africa, the Gulf and Europe, received a 1.8 billion rand ($122 million) cash injection from the government at the end of last month after struggling to pay salaries and suppliers.
Talks around restructuring Eskom Holdings SOC Ltd.’s bonds must be approached carefully to avoid spooking the market, according to S&P Global Ratings, Bloomberg News reported. Public Enterprises Minister Pravin Gordhan said on Thursday the government will consult with the power utility’s debt holders on any reorganization and that there isn’t any real concern about haircuts.
Eskom Holdings SOC Ltd.’s power system “remains tight and vulnerable” going into South Africa’s summer because of increased maintenance, Bloomberg News reported. As the state-owned utility schedules more work to improve its aging fleet, it’s also experiencing more vandalism of its equipment and illegal connections, Chief Operating Officer Jan Oberholzer told journalists in Johannesburg on Wednesday. Eskom has managed to run for 164 straight days without implementing rotational power cuts, Oberholzer said.
The South African government may be forced to inject more money into state power firm Eskom by the end of March if the struggling utility fails to meet its borrowing plan, a Treasury official told parliament on Wednesday, Reuters reported. Eskom supplies more than 90% of South Africa’s electricity but does not generate sufficient cash to meet its debt-service costs and relies on state bailouts to stay afloat.
A senior market analyst is challenging Cell C’s largest shareholder, Blue Label Telecoms, to provide financial evidence that SA’s third largest mobile operator is solvent, ITWeb reported. David Shapiro, deputy chairman of Sasfin Securities, says it’s disturbing that shareholders in the mobile operator have chosen silence instead of explaining the future of the company to the markets. SA’s third-largest mobile operator was yesterday downgraded by ratings agency S&P Global Ratings to “default” status, after Cell C failed to make interest payments in July.
South Africa’s third-largest wireless carrier, Cell C Pty Ltd, had its credit rating cut to D by rating agency S&P Global after it failed to make interest payments due in July, Bloomberg News reported. There is “an increased likelihood that Cell C will be unable to repay all or substantially all of the obligations as they come due, unless it is able to restructure its debt and recapitalize its balance sheet,” S&P said in a statement on Thursday.
An acceleration in economic growth in South Africa could trigger power cuts, with state utility Eskom Holdings SOC Ltd.’s fragile generation system unable to respond to increased demand for electricity, Bloomberg News reported. The energy availability of Eskom’s generation fleet is supposed to be as high as 80%, but is currently as low as 69%, and even a 0.1% rise in gross domestic product could result in outages, Nelisiwe Magubane, an Eskom board member, said at an event organized by research company Afriforesight in Johannesburg on Wednesday.