Fitch warns downgrade possible if Eskom turnaround fails
The ratings agency warns that SA's rising debt also remains a concern
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 c...
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