The Democratic Alliance (DA) has released a statement reacting to reports that Treasury is considering a “debt swap” to save struggling power utility Eskom from collapse.
While Eskom had lobbied for such a swap prior to the February budget speech, asking for relief to the tune of R100 million, both President Cyril Ramaphosa and Finance Minister Tito Mboweni rejected the option at the time.
The Daily Maverick, however, reported earlier on Monday that talk of a debt swap is “resurging”.
“The DA strongly opposes this idea, as it would likely send the country down the dark path of a downgrade to junk status,” the statement says.
While South Africa is already rated as below investment grade – commonly referred to as “junk status” – by ratings agencies S&P global and Fitch, Moody’s has so far refrained from downgrading the country to below investment grade, although there are fears that this might happen when they next consider our status in November, amid warnings from the agency that Ramaphosa must appoint a credible cabinet to restore confidence and enable economic growth.
“Reports of this debt swap come after President Cyril Ramaphosa ruled out this option earlier this year. This proposed plan will not address the underlying problems at Eskom, it’s simply a temporary solution to the massive governance failures at the utility.
“As it is the minister of finance who has the authority to make this decision, the DA calls on Minister Tito Mboweni and National Treasury to come clean and give an urgent update on government’s reported plans on a debt swap. The DA has also called for a debate of national importance on Eskom’s financial crises.”
The DA argues that a debt swap “will not solve the problems at the power utility as it is simply an attempt to hide the true state of Eskom’s dire financial affairs”.
“A debt swap of this nature is not feasible for South Africa’s standing in the long-term, as it will result in an estimated R100 billion in investment to flow out of the country.
“The DA will continue to keep a close eye on the developments at Eskom, as we maintain that the challenges at Eskom [are] far greater than the ANC government would want the public to believe,” the statement concludes.
(Compiled by Daniel Friedman)