SIKONATHI MANTSHANTSHA: Equity for debt is way to go for Eskom
The proposal to convert debt owed by Eskom to shares in the hands of its creditors is the most plausible and sustainable idea to fix what is broken at the electricity supplier. Converting the debt into equity would have the immediate effect of eliminating the high interest payments due to creditors and release government funds for more pressing social services while ensuring an income stream for the fiscus. Done correctly, it could be a catalyst and model for future state engagement in business. This model could be replicated across the suite of state-owned companies, starting with SA Airways and Denel. In the half-year to September 2017, Eskom paid R15.7bn in interest to investors holding R540bn of its bonds and other debt instruments. It pays more than R40bn in interest and finance costs to its lenders each year. Eskom’s own projections show it will spend about R215bn on interest payments in the years to 2022. But the utility has since earned itself further credit downgrades, maki...
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