South Africa’s fiscal woes magnify as Eskom losses balloon

SOUTH AFRICA - Report 31 Jul 2019 by Iraj Abedian

South Africa’s widening budget deficit on the back of lower GDP growth, coupled with increased spending (including government’s financial support for Eskom) as well as the downward adjustment of GDP growth for 2019 led Fitch Ratings Agency to revise the country’s outlook to negative from stable (leaving the credit rating in sub-investment grade) last Friday (July 26). Indeed, these disappointing factors leave eyebrows raised about South Africa’s economic growth prospects.

On Tuesday (July 30), Eskom published its 2018/19 financial year integrated report. It posted a loss of R20.7 billion in the year of review, compared to the R2.3 billion loss in the preceding year. This marks the largest loss ever recorded by a state-owned entity since the 2014/15 R14.6 billion loss by PetroSA. The hefty loss (by Eskom) was chiefly due to a surge in costs of primary energy (especially coal costs, which have ballooned by 17% between financial years 2017/18 – 2018/19) and runaway municipal debt.

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