Eskom bailout could lead to credit downgrade: economist

Eskom's R59-billion bailout is likely to come at an even greater cost. Experts say the chance of a credit downgrade is high.

JOHANNESBURG - Eskom's R59-billion bailout is likely to come at an even greater cost.

Experts say the chance of a credit downgrade is high.

On Tuesday, the IMF cut South Africa's growth forecast, citing bailouts to SOEs, the most being to Eskom as primary reasons.

READ: IMF downgrades world growth, warns of 'precarious' 2020

Eskom will receive the multi-billion rand over the next two years.

Efficient Group chief economist Dawie Roodt said there are two levels that are important.

"The first one is that we need electricity. If we don't have electricity the economy cannot operate," said Roodt.

READ: Moody's lowers South African growth forecast after Q1

"The second is finance. Eskom is so deep in trouble ... it's not going to be easy to save it."

Roodt said the state itself is hugely in debt.

"The state keeps on borrowing more and more money and eventually the whole thing will fall over."

READ: Eskom bailout will cost South Africa: Mboweni

Roodt said he cannot see how South Africa can avert a downgrade this time around.

In June, Moody's lowered its forecast for South Africa's 2019 economic growth to 1.0 percent from 1.3 percent after it said a first-quarter contraction had dented the government's revenue and policy options.

Moody's is the last of the big three international credit firms to rate South Africa at investment grade.

How many bailouts has Eskom received since 2015 and just how much has each South African citizen had to contribute to the up-keep of the ailing state-owned power utility?

Source
eNCA