Will Eskom’s Debt Bring SA To A Downfall?

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With terms like Eskom being “too big to fail” clearly Eskom is a huge power parastatal and with it not being back on track can have dire consequences for South Africa’s (SA’s) economy. 

Even economic predications for Eskom in 2019 have included that if SA doesn’t resolve the loadshedding crisis the country will be downgraded to junk status. And this will undoubtedly have a negative effect on both the economy and on investors. 

Experts had since recommended to President Cyril Ramaphosa that Eskom should be split up into three different firms’ generation, distribution and transmission. Ramaphosa was expected to release an Eskom turnaround strategy. And that he did. 

During his speech in Parliament to the response session to the debate on his State of the Nation address (Sona) 2019. The President announced that Eskom would be divided into the three separate state-owned entities – generation, transmission and distribution, all under Eskom Holdings. 

The president said restructuring the power utility will reduce the risk of a massive Eskom, that at times has, in its current form, been termed “too big to fail”, placing government in a position where all its eggs are in one basket.  

“[The restructuring] will align Eskom with international electricity trends where the vertically integrated electricity utilities have been broken up to enable better regulatory oversight. Through a single buyer model, and increase competition in the generation and distribution space, driving down the cost of electricity for the economies. 

Ramaphosa said that ultimately, the restructuring of Eskom is intended to ensure security of electricity of supply for the country, which is critical to building up the positive investor sentiment and confidence essential for the investment required to create sorely needed jobs. 

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