Johannesburg - Financial problems at Eskom have pushed the government to look into selling stakes in state companies to free up funds to update the utility and ease power blackouts.
President Jacob Zuma's ANC has long been reluctant to sell company stakes to ease the strain on the budget, for fear of upsetting powerful labour union allies who say this would cause job losses.
But state-owned Eskom urgently needs 250 billion rand to upgrade its infrastructure and this has left the ANC, managing a national debt of 50 percent of GDP, with little choice but to rethink the state ownership model it has followed since the end of apartheid in 1994.
While it has deferred giving details until the budget in February, it is considering relinquishing shares in listed firms such as mobile firm Vodacom and landline phone operator Telkom, in which it has a 51 percent stake, sources involved told Reuters.
It could also sell shares it owns through the state Industrial Development Corporation, which include 8.2 percent in petrochemicals firm Sasol worth $2.6 billion, nearly $2 billion in Kumba Iron Ore and a 1.6 percent interest in mining giant BHP Billiton that could fetch $1.1 billion.
The government also has the option of selling part of freight logistics giant Transnet, arms manufacturer Denel, forestry firm SAFCOL, diamond miner Alexkor and troubled national airliner South African Airways (SAA).
The government said in October it would sell “non-essential assets” to raise 20 billion rand ($1.72 billion) to inject into Eskom, which would use an existing state guarantee to borrow another 225 billion rand, from the open market.
But analysts say it could raise more and more quickly than after the February budget as the government conceded this week Eskom only has enough money to operate until January.
“It really should not be taking this long (to sell assets) - through to the budget. These are such liquid assets that you could put a plan together in six weeks,” said Nomura International analyst Peter Attard Montalto.
Like Eskom, SAA has long been plagued by financial problems, and the government recently turned down its request for more aid after previously disbursing two separate bailouts totalling 10 billion rand.
Eskom has struggled to fund the construction of new power stations, leading to delays in bringing new power onstream from its Kusile and Medupi plants.
The national grid has come under renewed pressure in recent weeks, forcing the company to implement rolling blackouts in the worst power crunch since 2008.
The ANC announced on Thursday that an overhaul of Eskom, SAA and the strike-hit Post Office will be led by Deputy President Cyril Ramaphosa, a billionaire former business mogul.
Many economists say instead of throwing money at state firms run into the ground by years of mismanagement, the government should privatise companies like Eskom.
“We believe selling non-core assets would merely be a quick fix for Eskom when in fact the underlying problems are not being addressed,” said Sean McCalgan, an analyst at ETM Analytics.
“The government should be looking to sell off portions of Eskom ownership rather than other assets and trying to patch up holes.” These sentiments are echoed by the main opposition Democratic Alliance.
“The partial privatisation of Eskom and the involvement of other independent power producers is now a mathematical inevitability. The status quo is simply no longer affordable,” shadow minister for public enterprises Natasha Michael said.
Such a move would however meet strong resistance from powerful labour federation COSATU, which says Eskom's problems started in the 1990s, when the government scaled down investment in the power sector hoping that the private sector would step in.
Labour unions have long argued against privatising what it calls essential entities, saying this would invariably lead to a deterioration of services to poor communities and job losses, as new private owners sought to cut costs and boost profits.
“COSATU will fight attempts to privatise Eskom to the bitter end,” it said recently. ($1 = 11.6340 rand)
Reuters