April 19, 2019 / 9:32 AM / 5 months ago

South African government rescued Eskom from default in April

FILE PHOTO: Phakamani Hadebe, Eskom Group Chief Executive looks on ahead of Eskom's 2018/19 interim results announcement at the Eskom's head office at Megawatt Park, Sunninghill, South Africa, November 28, 2018. REUTERS/Siphiwe Sibeko/File Photo

JOHANNESBURG (Reuters) - South Africa’s government rescued Eskom from default early this month by giving the struggling state power firm $355.5 million to help it meet its obligations, according to a finance ministry report to parliament seen by Reuters.

Eskom supplies more than 90 percent of the electricity in Africa’s most advanced economy but is choking under a mountain of debt which it struggles to service.

The 5 billion rand ($355.5 million) transfer, authorised on April 2, falls within the 23 billion rand a year bailout the South African government had already promised to give Eskom over the next three years.

The finance ministry report, dated April 16 and signed by Finance Minister Tito Mboweni, said the government originally anticipated giving Eskom the bailout money between August and October this year.

But by the end of March, Eskom was experiencing difficulties raising funding, the report said.

“In order to avert a default by Eskom on its obligations, on 2 April 2019, the Minister of Finance ... authorised the payment of 5 billion rand,” the report said. It added that Eskom could need another government cash injection before the end of the month.

A finance ministry spokesman confirmed that Mboweni had authorised the transfer of money to Eskom.

Early this month, Public Enterprises Minister Pravin Gordhan said the highest levels of government were considering a variety of additional financial support measures for Eskom, beyond the bailout announced in February.

Energy experts say the bailout is insufficient to make Eskom financially sustainable in the long term.

Reporting by Alexander Winning; Editing by Kirsten Donovan and Emelia Sithole-Matarise

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