Davos, Switzerland - The government has identified assets to sell to help Eskom cover its funding gap, with the first cash injection of R10 billion expected by about June, Finance Minister Nhlanhla Nene said.
“We’re making good progress,” Nene said in an interview with Bloomberg TV Africa on Wednesday at the World Economic Forum in Davos.
The plans “are at an advanced stage, but at a sensitive stage” because it might be market-sensitive, Nene said, declining to identify the assets.
Nene said in October the government would sell non-strategic state assets to raise R20 billion for Eskom to help the power utility fund a R225 billion cash-flow gap. Barclays said in a note on January 14 that the government’s 14 percent stake in Vodacom. and 40 percent holding in Telkom would be the quickest to sell. “We are looking at around June to release the first R10 billion, but that will only be done once we’ve received the proceeds from the disposal of state assets,” Nene said.
Eskom, which generates 95 percent of South Africa’s power, started rolling blackouts in November and warned on January 15 of almost-daily managed cuts until April as it struggles to meet demand while doing maintenance on plants. Bank of America Merrill Lynch estimates that three months of outages may shave as much as 1 percentage point off the economic growth rate.
“We have got to go through a little bit of pain” to solve the country’s electricity crisis, Nene said. “The reason we are going through it is precisely because we are addressing the challenge.”
The International Monetary Fund on Tuesday cut its 2015 growth forecast for the continent’s second-largest economy to 2.1 percent from 2.3 percent.
Several state-owned companies are facing funding challenges, adding to pressure on the government’s fiscal plan.
The effect of possible monetary policy tightening by the US Federal Reserve has already been priced into the rand, Nene said.
The currency has weakened 9.2 percent against the dollar since the start of last year and was trading as low as 11.5480 yesterday. – Bloomberg