Panel 5: The SOE Debt Crisis – What is to Be Done?

P5.1 Managing State-Owned Companies’ Debt

Dr Neva Makgetla, Trade and Industrial Policy Strategies

Summary: The extent of the financial losses experienced by many of South Africa’s state-owned companies (SOCs) are discussed in this commentary, along with an exploration of the factors that have led to the debt crises many find themselves in.  Three interrelated issues are highlighted,that are proposed to have contributed to the crises: economic slowdown related to the drop in mineral prices, the lack of early state intervention, and unrealistic business models.

"The top 25 State Owned Companies employ 175 000 people, of whom four-fifths work at Transnet, Eskom, Passenger Rail Agency of South Africa and the Post Office."

- Dr Neva Makgetla, Trade and Industrial Policy Strategies

"The top 25 State Owned Companies employ 175 000 people, of whom four-fifths work at Transnet, Eskom, Passenger Rail Agency of South Africa and the Post Office."

- Dr Neva Makgetla, Trade and Industrial Policy Strategies

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P5.2 The SOE Debt Crisis: What is to Be Done?

Dr Stuart Theobald, Intellidex

Summary: Discussing state owned enterprise debt, specifically that of Eskom, this commentary explores how Eskom could reduce its debt load by half. The focus is on two different sets of considerations that should help inform which approach is best in dealing with Eskom’s debt. The first are technical considerations, those that are lowest cost and most feasible in line with debt market requirements.The second are policy considerations, those that best fit broader policy reform objectives such as the stabilisation of overall energy supply and reduction in carbon emissions.

"To rectify this situation, ideally Eskom needs to reduce its debt load by about half. This means removing R250 billion of debt from its balance sheet in order to reduce its debt service costs to within its potential operating cash flows."

- Dr Stuart Theobald, Intellidex

"To rectify this situation, ideally Eskom needs to reduce its debt load by about half. This means removing R250 billion of debt from its balance sheet in order to reduce its debt service costs to within its potential operating cash flows."

- Dr Stuart Theobald, Intellidex

Watch the video to find out more

READ contribution