HomeIndustry SectorsFinance and PolicyNo bail out for cash-strapped South African utility

No bail out for cash-strapped South African utility

The Industrial Development Corporation (IDC) said it would not consider selling its holdings in listed companies in order to take pressure off the country’s cash-strapped power utility, Eskom, its chief executive told local media.

South Africa’s government has said it would dispose of “non-strategic” assets to raise much-needed money to help finance the ailing power utility Eskom and help end frequent electricity outages.

Speaking to the Business Day newspaper, Geoffrey Qhena said the complete disposal of IDC stakes, which amount to about R46 billion ($4 billion), is “out of the picture” as the company was self-funding and would require the holdings to remain financially independent.

A Barclay’s note this week said the sale of the private assets held by the IDC was the fastest and most likely way to provide funds to state-owned Eskom.

South Africa is currently facing its worst power crisis since 2008, as Eskom struggles to keep the lights on due to ageing and poorly maintained power stations.

As of next Monday, 19 January, South Africans should prepare for load-shedding for at least five days a week when the system is constrained.

Eskom presented this information at their first State of the System briefing of the year on Thursday afternoon at Megawatt Park in Sandton.

Eskom Infographic on Load SheddingThis slide from the presentation shows Monday – Friday in red almost every week up until the end of April, which indicates “Insufficient generation capacity, unable to meet demand and reserves. High probability of load-shedding.”

The utility last Friday implemented rolling blackouts in some parts of the country, the first such power cuts for 2015, and has warned that more are certain as the company has no funds to purchase fuel for its gas turbine stations.

Even with a R20 billion cash injection from the government and permission to raise electricity tariffs, Eskom has said it needs more funds to ensure liquidity.

IDC has stakes in companies such as Kumba Iron Ore, Sasol, BHP Billiton, Hulamin and Sappi.

Source: Reuters

Nicolette Pombo-van Zyl
As the Editor of ESI Africa, my passion is on sustainability and placing African countries on the international stage. I take a keen interest in the trends shaping the power & water utility market along with the projects and local innovations making headline news. Watch my short weekly video on our YouTube channel ESIAfricaTV and speak with me on what has your attention.