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Rumours of Eskom debt swap irresponsible ? Treasury

23 Oct 2019, 04:14 GMT+10

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People speculating that government is considering a debt-equity swap to help plug Eskom's debt gap are "irresponsible" and have a "damaging effect" on the country's future, according to Treasury Director-General Dondo Mogajane.

Mogajane was speaking to Fin24 by phone on Tuesday afternoon.

While he was replying specifically to talk on social media that government may be considering taking on Eskom's estimated R450bn debt, proposals for the state to take over a portion of the utility's debt in return for equity have been raised by business leaders and economists. In February, the utility's former CEO Phakamani Hadebe, for example, said the easiest way to rescue the power utility would be for the government to assume part of its debt. Nedbank Group CEO Mike Brown said in July that, while Eskom needs an immediate injection of cash to continue operating, a debt-to-equity swap should be considered later.

Bloomberg reported in July, meanwhile, that state asset manager the Public Investment Corporation, which manages about R2.1trn on behalf of state workers, was considering swapping its Eskom bond holdings for equity. The PIC holds 20% of all of Eskom's outstanding bonds. According to Bloomberg, five people with direct knowledge of the talks said the proposal was for the asset manager to become a shareholder in the utility with a say over its finances and board representation.

Earlier on Tuesday afternoon, analyst Wayne McCurrie of FNB Wealth and Investments tweeted that the rand was rallying on "rumours" of a possible debt to equity swap for Eskom. The local currency was at 14.67 at 15:15, up 0.6% on the day.

McCurrie added that the upcoming mini budget would be an important platform for government to answer questions about Eskom.

While government has taken a number of steps to help boost Eskom's strained financial position including

a grant of R59bn over two years included in a special appropriations bill currently being considered by Parliament; and a

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