South Africa’s National Treasury has announced plans to accelerate the restructuring of ailing power utility Eskom. This decision comes after ratings agency, Fitch, opted to keep the sovereign credit rating on hold but still with a negative outlook.
Responding to Fitch’s decision, the Treasury says it is in partnership with the Department of Public Enterprises to institute a series of measures which will bring discipline to the utility’s finances, and to step up the timeline for restructuring,”.
Fitch warned on Wednesday, that failure to form a credible plan to stabilize government debt worsened by bailouts for troubled state-run firms like Eskom, could prompt a downgrade. This is regularly cited as one of the key risks to South Africa’s economy.
State-run enterprises in South Africa have had a record of mismanagement and political interference. Most have been operating on government bailouts without plans to be self-sufficient or profitable