Picture: 123RF/Steven Heap
Picture: 123RF/Steven Heap

Failure to implement a turnaround plan at Eskom could spell another downgrade for SA, Fitch Ratings said.

“Failure to implement a turnaround plan that stems annual losses at Eskom, and limits the future growth of contingent liabilities, would add to downward pressure on the sovereign ratings,” the rating agency said in a statement on Thursday, a day after finance minister Tito Mboweni’s maiden budget.

Mboweni painted a bleak picture of SA’s ballooning debt as he announced a massive cash injection into Eskom.

Treasury will allocate R23bn a year for the next three years to the power utility in an attempt to support the urgent operational changes planned.

“The country’s dependence on Eskom for electricity generation mean the government would likely support Eskom even if re-structuring does not proceed as planned,” Fitch said.

While support to the cash-strapped utility will have a limited effect on SA’s sovereign risk profile because of existing large contingent liabilities, the country’s rising debt remains a concern, Fitch said.

“The continued medium-term upward trajectory in government debt in the face of persistent broader spending pressures remains a source of downward pressure on SA’s ratings.”

This is despite efforts that show “the government’s commitment to fiscal sustainability”, including cutting wage expenditure to contain the impact on the budget deficit in an election year.


Fitch downgraded SA to junk status in 2017 on the back of a  surprise cabinet reshuffle by then-president Jacob Zuma and an unfavorable medium-term budget policy statement.

SA’s rating reflects risks to public finances from Eskom’s high debt and large contingent liabilities more broadly, Fitch said.

The rating agency said fiscal policy in the lead up to the 2019 election will be a key determinant in SA’s sovereign rating.

Meanwhile, Moody’s Investors Service said earlier in the day that until the government provides a clear and detailed plan of how Eskom will be restructured, the troubled power utility will continue to overshadow the country’s public finances.

The rating agency, the last of the big three ratings agencies to rate SA at investment grade, also expressed doubt that the government would  be able to keep spending pressures under control should economic growth remain weak.

“Unless and until a clear adjustment path is tabled, Eskom will remain the source of contingent liability risks, weighing on SA’s fiscal strength,” Moody’s warned.