South Africa: Leadership crisis short-circuits Eskom
Electricity firm without chairman and CEO; Infrastructure investment plans challenged
"The problem of electricity capacity in South Africa won’t be solved for at least five to eight years"
Roelof Horne, Investec
A leadership clash could hardly come at a worse time for Eskom, South Africa’s state-owned electricity generator. The prospects for the country’s recovery hinge to a large extent on Eskom’s ability to implement a R385 billion ($52 billion) investment programme and prevent blackouts of the kind the country experienced in 2008. Nationwide power shortages have only been alleviated in 2009 by the impact the recession has had on demand. Eskom is seeking regulatory approval to treble its tariffs over the next three years. But the authorities could block the price increases because of the impact they would have on individual consumers and the all-important mining industry.
On October 9 Eskom’s then chairman Bobby Godsell said the firm could borrow R50 billion this year. The government has said it would guarantee borrowing by Eskom of up to R176 billion over five years.
On November 11, the firm sold R500 million of nine-year bonds at a yield of 9.525 and a spread of 67 basis points to nine-year government notes, according to Bloomberg.