13 February 2009 – US$17.8 billion of Eskom’s debt will be guaranteed by the South African government, finance minister, Trevor Manuel announced during his budget speech this week.
The government will underwrite US$2.6 of existing debt and US$15 of anticipating borrowing. This is all part of the US$34 billion expansion plan Eskom is undertaking to increase generation capacity within South Africa.
Speaking yesterday, Kuben Naidoo, head of Treasury’s budget office, said that the guarantees will "go a long way in lowering Eskom’s borrowing costs", adding that Eskom would pay a fee for the guarantees to Treasury, although this fee ‘isn’t significant’ he said.
"If required, government would either repay the debt in its entirety or step into the shoes of Eskom and continue to make payments on Eskom’s behalf," the Treasury said.
Talks continue between Treasury, Eskom and the World Bank for a loan of US$5 billion, although Lungisa Fuzile, deputy director-general for the Treasury’s assets and liability unit cautioned that the talks hadn’t reached a point "where papers can be signed".