Eskom’s debt plan at center of South Africa’s medium-term budget

By Kopano Gumbi

JOHANNESBURG, October 25 (Reuters)South Africa’s finance minister is expected to announce a plan on Wednesday to take on some of electricity utility Eskom’s colossal debt in a medium-term budget, although analysts say the legally complex transfer will take time to complete. ‘execute.

State-owned Eskom has been mired in the financial crisis for years and has around 400 billion rand ($21.69 billion) in debt that it cannot afford to repay.

This has required recurrent government bailouts that have strained public finances, with officials grappling with different ways to tackle the problem.

Economists say much of Eskom’s debt needs to be absorbed by the state to make it financially stable.

“Anything below 150 billion rand would be deemed insufficient,” said Isaah Mhlanga, chief economist at Alexforbes. AFHJ.J.

BNP Paribas analysts said getting buy-in from bondholders for the debt transfer would be key.

Economists are also watching whether Finance Minister Enoch Godongwana unveils new support measures for the poor, as civil society groups have pushed for the introduction of a universal basic income benefit.

The Institute for Economic Justice, a Johannesburg-based think tank, says a subsidy of R350 per month introduced during the COVID-19 pandemic should be increased to the food poverty line of more than R660 per month. , which could cost the state an additional R30 billion a year.

Some economists believe that a temporary extension of the R350 grant for social relief of distress could be funded by higher than expected revenues from mining taxes.

But overall, analysts expect the government to stick to a conservative fiscal policy as economic growth is expected to remain weak in the coming years and global financing conditions are expected to tighten.

“We expect the fiscal consolidation strategy to be sustained, providing fiscal certainty and sustainability,” local bank FNB said in a research note.

A Reuters poll the projected buoyant mining revenues would allow Godongwana to give a narrower budget deficit forecast for this fiscal year.

($1 = R18.4449)

(Reporting by Kopano Gumbi; editing by Alexander Winning and Jason Neely)

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