Treasury: If Eskom's turnaround plan is 'credible' SA can maintain its credit rating

2019-03-01 11:34 - Lameez Omarjee
(Gianluigi Guercia, AFP) ~ AFP

SA's ability to maintain its credit rating depends on the credibility of Eskom's turnaround plan, members of Parliament heard.

The Standing Committee on Finance on Friday was briefed by a team from Treasury about queries raised by the public on the National Budget.

Acting deputy director general for the Budget Office Ian Stuart spoke specifically to the challenges posed by Eskom. Treasury had to revise the expenditure ceiling upwards to make provision for the R69bn financial support to the power utility over the next three years.

Responding to a question about how credit rating agencies would view this move, Stuart said that the outcomes would rely heavily on the reform of Eskom. Stuart explained that ratings agencies would want to see the reform take place credibly, and transparently as this would address the biggest risk to the economy and public finances.

"If the plan is credible then we will be able to maintain the credit rating," Stuart said.

Moody's is the only ratings agency which has SA rated at investment grade.

Stuart also responded to questions about the total value of the financial support Eskom needs.

"There is uncertainty of the support Eskom requires," Stuart said. This mainly hinges on the tariffs Eskom will be able to charge. Treasury has assumed tariffs of 10% in its projections.

Eskom has requested the energy regulator to grant it tariff hikes of 17.1%, 15.4% and 15.5% over the next three years respectively. The energy regulator will on Thursday, March 7, announce the outcomes of Eskom's tariff application.

Last year, Eskom had approached Treasury for a debt takeover of R100bn. But having discussed the matter with the presidential task team, it was determined that Eskom requires balance sheet support of R150bn amortised over 10 years.

Stuart said it is possible to do things differently and different options are being considered.

Eskom has R419bn in debt it has to settle, and the financial support from government will go towards helping Eskom service its debt, Stuart said.