South Africa: Reform of Eskom and energy market is needed, according to World Bank


(Ecofin Agency) – Eskom is too important to simply go bankrupt and requires reform, not only of its organization, but of the energy market, according to the World Bank.

"The company is too big to simply disintegrate. Repairing all the parts that need it will be more expensive than reforming the whole. Paul Noumba Um (pictured), the World Bank director for South Africa, said.

Before continuing: "If you want to remain an asset to the country, you will also have to pay attention to the transition to clean energy that is happening. So, the reorganization of the market is of paramount importance, just as important as ensuring that every part of this market plays its role. "

The government is considering this reform, and will accelerate it after the May general election. The implementation of these measures will take more or less time, depending on their size. The precarious financial situation of the public entity, which has, among other things, 420 billion rand of debt ($ 30 billion), has become a priority for the government.

government that could not resist a collapse of this public company.

For the bank, it would be necessary to restructure the three units that currently make up Eskom, which are electricity generation, transmission and distribution. It is also important to restructure the entity's debt according to the state guarantee that will have to take over in case of incapacity of the company.

According to a report issued by the financial institution, the projected growth of South African GDP is 1.3%, an estimate of the average of 4.2% of emerging countries and 3.7% of countries in sub-Saharan Africa . The possibility of a drought, the debts of public entities and contingent liabilities, are the causes of this weak forecast.

The maturing of the liabilities of public entities could add two percentage points to the country's debt-to-GDP ratio, rising to 55.8% for the 2018/2019 budget year.

Gwladys Johnson Akinocho


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