ASHA SPECKMAN: Eskom is wearing out even patient Moody's
Could it be that the gloves are finally off between Moody's and the government and we should expect another eventful year in 2019? Never mind the other issues for SA - the fallout from land reform, the many commissions of inquiry and the looming elections will keep us sufficiently occupied.
SA is already skating close to the precipice of a credit ratings downgrade from the usually patient international ratings agency, which is the only one that has kept us on investment grade. Analysts are now speculating about a potential downgrade.
While a downgrade would be worrying, the subtle cautionary tone in a report about Eskom from Moody's this week was as refreshing as it was surprising.
It is safe to deduce that Moody's is gatvol with the culmination of several years of poor management at Eskom, which has hobbled the country's main source of electricity supply and is among the factors that has stifled meaningful economic growth.
If the government waves its magic wand and takes onto its balance sheet at least R100bn of Eskom's R419bn debt, as is reportedly being considered, it will put SA's credit rating at risk. Such a move could raise SA's debt-to-GDP ratio by two percentage points, from the 55.9% envisaged for the 2019 financial year - additional pressure on an already high debt bill.
Moody's warns about this, as well as saying that any decision by the government to transfer Eskom's debt onto its balance sheet "comes with moral hazard". Moody's further qualifies the rebuke, saying that the debt transfer would likely be embedded in the next national budget, while cost-cutting measures at Eskom are likely to take place only after the general elections next year.
In other words, Eskom will be rewarded without any real action on its part.
Why should any aid from the state and by extension taxpayers be granted without the condition that a clear action plan to reduce overheads and operate efficiently is implemented?
If left unchecked, promises are allowed to fall by the wayside, as we've seen at other state-owned companies, notably SAA. Even when the Treasury took SAA under its wing - extending guarantees and promising that aid disbursed would be subject to conditions - the operational environment and funding challenges appeared to deteriorate further. When the government sold its stake in Vodacom a few years ago to raise R23bn for Eskom, a widespread criticism was that the state was throwing money down a black hole, a premonition that subsequently manifested.
Moody's criticism comes against a backdrop of numerous costly commissions of inquiry set up in an attempt to remedy the damage of an era in which many cabinet ministers stood by as some state institutions were hollowed out by state capture.
I don't think anyone can quibble with Moody's pointing to the government's and state-owned enterprises' questionable track record.