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Power Utility Eskom Is Wildcard in South Africa’s Debt-Stabilization Plan

  • Budget update shows stronger revenue collection, slower growth
  • Godongwana affirms pledge to temper public-service wage bill
A sign outside the Eskom Holdings SOC Ltd. Acacia electrical substation in the Monte Vista district of Cape Town, South Africa.
A sign outside the Eskom Holdings SOC Ltd. Acacia electrical substation in the Monte Vista district of Cape Town, South Africa.Photographer: Dwayne Senior/Bloomberg

South Africa set more ambitious targets to stabilize public finances without having to raise taxes and revealed the broad brushstrokes of a plan to tackle the state power utility’s unsustainable debt in its budget update. 

State debt will peak at 71.4% of gross domestic product in the current fiscal year -- two years earlier and almost four percentage points lower than previously predicted, while the budget shortfall is expected to narrow through 2026, Finance Minister Enoch Godongwana told lawmakers in Cape Town on Wednesday. That’s as the effects of higher inflation, which bolstered nominal GDP projections, and improved revenue-collection estimates outweigh the adverse impact of higher borrowing costs and a weaker exchange rate.