A multibillion-dollar plan to expand South Africa’s electricity transmission network could throw a lifeline to the country’s corporate bond market.
A multibillion-dollar plan to expand South Africa’s electricity transmission network could throw a lifeline to the country’s corporate bond market as it struggles to recover from a post-pandemic slump.
While it hasn’t decided on funding models, at least some of the money would have to come from capital markets, according to Rand Merchant Bank. A flood of new issuance for transmission lines — and other infrastructure spending by state-owned companies — could help revive the corporate bond market, where new issuance remains below the record levels seen before Covid-19 plunged the economy into contraction. Issuance this year is at 116 billion rand, according to data compiled by Rand Merchant Bank, which expects borrowing to reach 131 billion rand by year-end, with state-owned companies contributing just 15 billion rand.
In an Oct. 9 review, Moody’s Ratings said Eskom would have to raise debt to finance network investments, but its ability to access markets on commercial terms — without new government guarantees — would depend on “significant improvement in its operations, debt collection, governance and regulatory arrangements.”
That would replace the explicit government guarantee that was used to encourage the private sector to invest more than 200 billion rand in renewable energy generation projects, but increased the government’s contingent debt liability.
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