The Goldman Sachs Group said in September that Eskom – which has more than R62bn due in principal debt payments in the next five years,
was the biggest single risk to the economy.
A summary of what Paton said:
- Eskom has a large amount of debt – R367 billion – and its debt burden is increasing by R70 billion a year.
- It is unlikely that Eskom can fix itself just by being run better. This is because even if it cuts costs – which will be difficult – it’s unlikely to sell a lot more electricity in the future.
- The banks don’t hold much in Eskom bonds, although asset managers hold quite a bit.
- The reason the banks are spooked by Eskom is not because of what Eskom owes them, but because it is conceivable that Eskom could cause a banking crisis.
- If Eskom was to default then Government would have to take all of its debt onto its own balance sheet and start paying interest on it. This could cause a spike in bond yields and a ratings downgrade which would raise borrowing costs across the economy.
~ Kabous le Roux, MSN Money