The beleaguered power utility Eskom is struggling to generate power, prevent outages, and pay back $23 billion in debt. South Africa’s labour minister said he will oppose any move to privatize Eskom.
According to employment and labor minister Thulas Nxesi, privatizing the company would be bad for the poor. Although the administration of President Cyril Ramaphosa has previously denied having any plans to sell the business, there have been calls to sell the asset. According to S&P Global Ratings, privatization may be the best solution to end the power crisis in the most industrialized country in Africa.
Nxesi, who is also the head of the South African Communist Party, declared, “I am not in favor of privatizing key state assets. “The majority of people won’t have access to electricity if you privatize it because it will be prohibitively expensive for them. Government intervention is necessary when the market fails for this reason.
With the government guaranteeing up to R350 billion ($20.6 billion) of Eskom’s debt, the economy and public finances of South Africa are significantly at risk. Since last month, the utility has been sporadically disconnecting 6 000 megawatts from the grid, leaving the nation in the dark for hours at a time and further limiting industrial output and growth.
Nxesi declared, “I consider the energy problem to be an economic crisis.
According to S&P Global Ratings, operational problems at Eskom endanger South Africa’s economic outlook and the utility’s revenue is insufficient to pay down its R396 billion in debt. Transferring the company’s debt to the state’s balance sheet would cause the state’s debt to significantly worsen.
Zahabia Gupta, S&P associate director of sovereign ratings for the Middle East and Africa, stated in an interview that these utilities “typically tend to be a problem, but then the ones that have done better are the ones that have done some kind of a wholesale privatization.” “Then, at least, the issue is no longer a government issue, and generally, the utilities function better.”
Eskom is being divided up by the government into three distinct companies: power transmission, generation, and distribution.
Additionally, Ramaphosa has announced policy changes that will reduce overbearing red tape and allow private investors to construct their own power plants up to 100 megawatts in size without needing a permit. To meet the nation’s needs, the state has also promoted increased support for renewable energy initiatives.
By failing to address the energy crisis by 2024, when the country’s next general election is scheduled to take place, the ruling African National Congress, according to Nxesi, risked upsetting South Africans.
