South Africa Treasury Seeks Funding Plan to Boost Eskom’s Liquidity

JOHANNESBURG (Capital Markets in Africa) – South Africa’s Treasury is identifying ways to boost liquidity at the embattled state-owned power utility as its cash reserves slide due to below-target revenue.

The National Treasury is concerned about Eskom Holdings SOC Ltd.’s “current financial position and has been working closely with the Department of Public Enterprises and Eskom to address the issues that are impacting the entity’s liquidity position,” the ministry said an emailed response to questions on Tuesday. “A number of funding initiatives have been identified to improve the liquidity position and government is doing its best to assist Eskom to access these funding sources,” it said without giving further details.

The power utility is spending billions of dollars on new power plants that are years behind schedule and domestic demand for electricity is at the lowest in more than a decade, weighing on revenue. Eskom is the biggest recipient of government guarantees for its capital investment program, according to the mid-term budget Finance Minister Malusi Gigaba presented last month.

While Eskom’s liquidity buffer is “way below” the desired 20 billion rand ($1.4 billion) it won’t ask the government for more funding or guarantees, spokesman Khulu Phasiwe said.

The utility is one of the several state-owned companies plagued by management problems and it has named four acting or permanent chief executive officers since December 2016. Lenders have said they’ll have the will to provide more funding only once the governance issues are taken care of, Phasiwe said.

“The government is addressing the governance issues that Eskom has been experiencing in order to improve investor confidence in the entity,” the Treasury said.