SA takes first step in Eskom finance-company sale

Johannesburg – Eskom’s mortgage unit may be sold after National Treasury began a pre-qualification process for bids, marking a
first step in efforts by the power utility to sell assets and stabilise
its financial situation.

Eskom Finance has an R8.7bn
loan book and about 16 000 customers, bid documents posted on a
government website on Wednesday showed. The government is exploring a
sale of all of the shares in the mortgage unit by way of a “competitive
tender process” with the pre-qualification period scheduled to end on
May 17, according to the papers.

Eskom, like other state-owned companies in South Africa, provides
home loans to its staff with about 38% of its employees currently
holding a mortgage backed by the electricity producer. The utility is
facing a financial crisis stemming from factors including weak demand,
delinquent municipalities that don’t pay their bills and widespread
allegations of


Eskom has signed a R20bn short-term credit facility with a group of banks and is taking deeper measures such as

reducing staff numbers to boost cash flow and lure back investors as debt repayments loom.

Eskom’s finance company, established 28 years ago, has had a
loan-loss ratio below 0.1% for the past five years, according to
the tender document. More than 90% of the mortgage repayments are
managed by deducting the money from the employees’ salary each month,
the company said, without detailing the interest rates it charges on the

Since President

Cyril Ramaphosa took over the leadership of the country and the African
National Congress from his scandal-ridden predecessor

Jacob Zuma, he’s overseen sweeping changes to the Eskom board, with the
company’s new chief executive officer expected to be announced this

Nonetheless Moody’s Investors Service downgraded the power
producer’s credit rating again on March 28, citing a lack of clarity
regarding its plans to stabilise its finances.

While government tests the appetite for Eskom’s mortgage business,
there will need to be discussions with labour unions about the disposal
of the home-loans unit, Eskom spokesperson Khulu Phasiwe said by phone on Wednesday.

The process is in the early
stages and “whatever is going to happen about any non-core assets, that
will be shared with the unions,” he said.

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