IMF – The Operations, Finances, and Governance of Eskom Need to be Improved Decisively and Quickly

  • A staff team from the International Monetary Fund (IMF), led by Ana Lucía Coronel, met with the South African economic authorities and several other counterparts during May 26–June 6, 2022, to discuss recent developments and the economic outlook in the context of its regular surveillance cycle.
  • At the end of the visit, Ms. Coronel issued the following comments on South Africa’s energy industry:

“Frequent load shedding is an impediment to conducting business in South Africa. Despite some important progress in addressing the scarring effects of state capture on governance and institutions, sustained efforts are needed to improve procurement processes and deter corruption. It is more urgent than ever to transform the network industries and foster competition to attract private investment, create jobs, and reverse the slide in social conditions”.

Related news: Eskom huge debt burdon continues to trip utility

“The recent conclusion of the digital spectrum auction, and the changes in the licensing of generation capacity in the energy sector are welcome. These actions need to be complemented by broad-based removal of regulatory barriers to investment and competition, while resisting detrimental protectionist policies”.

Related news: South Africa’s energy regulator approves 16 renewable energy projects 

“The operations, finances, and governance of Eskom need to be improved decisively and quickly. Any solution to Eskom’s debt problem must be preceded and accompanied by concrete and credible actions to downsize the company’s balance sheet and restore its commercial viability. These include efforts to cut costs and collect arrears, as well as a more predictable tariff-setting mechanism. Otherwise, Eskom will continue relying on government support and remain a constraint to economic growth and a threat to the sustainability of the public finances.”

Related news: Eskom’s Medupi coal fired power station will not show a financial benefit over its lifetime

Author: Bryan Groenendaal

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