Question

What are the political concequences of Eskom's financial crisis in South Africa? Include references (10)

Answer 1

The political situation of South Africa is a parliamentary representative democratic republic, wherein the President of South Africa, elected by parliament, is the head of government, and of a multi-party system. Executive power is exercised by the government.

South Africa is a parliamentary representative democratic republic, wherein the President of South Africa, elected by parliament, is the head of government, and of a multi-party system. Executive power is exercised by the government. Legislative power is vested in both the government and the two chambers of Parliament, the Council of Provinces and the National Assembly. The judiciary is independent of the executive and the legislature. Government is three-tiered, with representatives elected at the national, provincial and local levels.

But Public Enterprises Minister Pravin Gordhan said the government would announce the package to address Eskom's debt problems, either before elections or “soon thereafter”. According to its latest financials, Eskom's debt is about R420-billion, but Mabuza indicated that it has since risen.

The World Bank rates the South African economy as an upper-middle income economy, one of only four African countries in Africa, the others being, Mauritius, Botswana and Gabon. ... The financial sector of the economy is exceptionally well managed, both at the government level and in the private banking sector.

As a result, the gross borrowing requirement rose from a projected R224.2 billion to R239.5 billion for 2018/19, or from 4.5 to 4.7 per cent of GDP. Over the next three years, R207.6 billion of domestic and foreign debt is scheduled for redemption.

Eskom will receive an additional amount of R26-billion for the current financial year (2019/20) and a further R33-billion for 2020/21. Eskom has two major problems. Its operating costs are too high and it can't pay its debt. It owes over R400 billion and does not generate enough cash to pay even the interest on its debt. ... Eskom has been getting steep tariff increases in recent years but these have driven some customers off-grid and shut others down.

Economy - overview: South Africa is a middle-income emerging market with an abundant supply of natural resources; well-developed financial, legal, communications, energy, and transport sectors; and a stock exchange that is Africa's largest and among the top 20 in the world.