PIC told to ensure Eskom viability before taking equity

Deputy Finance Minister, David Masondo
Deputy Finance Minister, David Masondo

The Public Investment Corporation (PIC), Africa's biggest fund manager, must ensure that state-owned power utility Eskom will operate profitably before its R92 billion debt pile is converted to equity, said Deputy Finance Minister David Masondo.

The plan proposed by workers' unions that the PIC convert its debt into equity to help ease the power utility's debt burden "has the potential to work", Masondo said. While Eskom has been able to pay interest on the debt, the power utility would need to generate sufficient revenue and profits to pay dividends, Masondo said.

"The PIC must ensure that the expected dividend earnings will be reasonably higher than the current interest earned on their loans," Masondo told the City Press newspaper. "Eskom must meet certain conditions if converting PIC debt to equity is to be successful and sustainable."

Eskom, which supplies almost all of South Africa's power, has about R450 billion in debt and its revenue doesn't match service costs. A proposal that the fund manager, which manages over R2 trillion, take a stake in the utility, was submitted to Treasury this year, the PIC chair Reuel Khoza said in June.

ZAR/USD
17.17
(-0.96)
ZAR/GBP
22.47
(-0.79)
ZAR/EUR
20.22
(-0.84)
ZAR/AUD
12.24
(-0.65)
ZAR/JPY
0.16
(-0.90)
Gold
1975.66
(-0.27)
Silver
24.30
(-0.46)
Platinum
919.76
(+2.03)
Brent Crude
43.61
(0.00)
Palladium
2082.00
(+1.21)
All Share
55829.40
(+0.19)
Top 40
51571.71
(+0.40)
Financial 15
9805.08
(-3.46)
Industrial 25
74738.74
(+0.31)
Resource 10
56585.24
(+1.85)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes. We need the money.
11% - 817 votes
It depends on how the funds are used.
74% - 5409 votes
No. We should have gotten the loan elsewhere.
15% - 1080 votes
Vote