South Africa

South Africa’s state power monopoly says it will need to charge consumers more for electricity if it is to cut its debts and stave off bankruptcy, even as rolling blackouts continue to plague Africa’s most industrial nation, the Financial Times reported. Years of corruption and mismanagement under disgraced former president Jacob Zuma left Eskom with surging costs, falling revenues, a fleet of breakdown-prone coal power stations and ballooning debts.

South Africa’s biggest pot of available cash — R1.91trn ($128bn) of civil-servant pensions and unemployment funds managed by the Public Investment Corp. — is emerging as the key to rescuing the debt-stricken national power monopoly, BizNews reported. The money manager has approached its parent agency, the National Treasury, with a proposal to ease the R464bn load of obligations crushing Eskom, signaling officials are gearing up for the complex financial and political operation to convert about R95bn of Eskom debt held by the PIC into equity.

South Africa’s biggest pot of available cash -- 1.91 trillion rand ($128 billion) of civil-servant pensions and unemployment funds managed by the Public Investment Corp. -- is emerging as the key to rescuing the debt-stricken national power monopoly, Bloomberg News reported.

Administrators at struggling South African Airways (SAA) said on Wednesday they have issued a 48-hour notice to prevent nearly 400 pilots from accessing the company’s premises until they agree to new employment terms and conditions, Reuters reported. SAA entered a local form of bankruptcy protection in December of 2019 after roughly a decade of financial losses, and its fortunes worsened after it grounded flights because of the COVID-19 pandemic. Efforts to rescue the state airline face resistance from trade unions, who are at loggerheads with the government over wages.

South Africa’s government and trade unions are at loggerheads over unpaid salaries at South African Airways (SAA), which could lead to a messy court battle that may further complicate efforts to rescue the struggling airline, Reuters reported. State-owned SAA has not made a profit in almost a decade and was already under bankruptcy protection when the COVID-19 pandemic struck, exacerbating its woes. It halted all but repatriation and cargo flights in March before suspending all operations in September. Some employees have not been paid since March.

South Africa started a fresh battle with labor groups in its effort to revive the bankrupt state airline, offering three months of wages to employees who haven’t been paid since March, Bloomberg News reported. The government’s Department of Public Enterprises and the National Union of Metalworkers of South Africa agreed to discuss the matter later on Tuesday, according to a spokeswoman for the labor group. Numsa and the South African Cabin Crew Association, another union, had expected members to be paid in full, in line with the country’s legal framework for a business-rescue process.

The South African government has transferred 1.5 billion rand ($98 million) to administrators for national airline South African Airways (SAA) but the funds cannot be used yet, the administrators said on Thursday, Reuters reported. The administrators said the conditions the Department of Public Enterprises (DPE) attached to how the money should be spent were in contravention of labour and companies laws. “We are unable to utilise the funds until the conditions have been amended by the DPE,” they added in a statement. A DPE spokesman said the department would comment later.

South Africa’s National Treasury and the state-owned Land and Agricultural Development Bank are being accused of dragging their heels in negotiating a rescue package for the stricken lender, leaving creditors in the dark as debt repayments loom, Bloomberg News reported. Asset managers and other lenders are yet to receive a response to their queries about financial covenants and the mechanism of a new bond program that will be 60% backed by the government, according to the country’s biggest specialist fixed-income money manager.

A massive increase in projected government debt poses a “major threat” to financial stability in South Africa, the central bank warned on Tuesday, while problem mortgages were also a risk, Reuters reported. South Africa’s government debt is now set to hit 82% of gross domestic product this year as the Treasury grapples with the impact of the COVID-19 pandemic. In its bi-annual review on the soundness of the financial system, the South African Reserve Bank (SARB) said this meant close links between the financial sector and government were now a serious worry.

South Africa could move toward an even deeper junk credit rating this week by losing the only stable outlook on its debt assessments, Bloomberg News reported. Of the 23 respondents in a Bloomberg survey, 12 expect S&P Global Ratings to change its outlook on the country’s credit rating to negative from stable on Friday. That means the next move from the company, which already assesses South Africa’s foreign-currency debt at three levels below investment grade, could be another downgrade. That would take the country to a single B rating and signal an increased probability of a default.