Eskom's financial woes might downgrade S. Africa's investment status
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E-mail Xinhua, August 8, 2019
JOHANNESBURG, Aug. 7 (Xinhua) -- Economists on Wednesday said that power utility Eskom's ongoing financial woes might drag South Africa's international investment into junk status in November.
"South Africa is in a serious financial position and it's possible to get a downgrade," Dawie Roodt, a senior economist at Efficient group told Xinhua.
Credit ratings agency Moody's is the only agency that keeps South Africa at investment grade while Standard & Poor and Fitch downgraded the country in 2017. It would review its report in November.
"I think Moody's has gone out of its way to keep South Africa on investment grade," said Roodt.
Roodt's remarks follows Moody's concern about Eskom's financial challenges.
Moody's said in a report that bailouts being given to Eskom were not sustainable.
"We view the additional cash transfers as credit positive, but the increased support has become necessary for Eskom to remain a going concern in the context of a number of developments affecting its cash flow generation. The company's operational and financial position has deteriorated," Moody's said in a statement.
Government recently announced that Eskom would be provided with a 59 billion Rand (3.9 billion U.S. dollars) bailout for the next two years.
Moody's said a turnaround strategy to deal with Eskom's problems was required.
Roodt said that it might take years to get the energy company's finances in order.
"The damage that was inflicted on Eskom is not something that can be turnaround in months, it needs years. State coffers are empty," Roodt said.
Prof Jannie Rossouw, Head of School of Economic and Business Sciences at the University of the Witwatersrand, told Xinhua that the country might not be able to escape a junk status.
"All these rating agencies have been warning about Eskom's situation and we might find ourselves in trouble because of it," he said.
Rossouw said that Eskom must "rein in its spending, salary bill should be drastically reduced as it's not sustainable." Enditem
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