South Africa's treasury delays debt guarantees for water infrastructure arm
South Africa's state water infrastructure entity, the Trans-Caledon Tunnel Authority (TCTA), which needs to raise 33 billion rand ($2.21 billion) in 2021, said on Tuesday delays by treasury in guaranteeing its debt were pressuring its funding plan.
The delay is due to treasury's tightening of conditions for guarantees and bailouts to state-owned entities (SOEs).
Government guarantees for SOEs stand at around 581 billion rand. Two-thirds is accounted for by state power firm Eskom debt. The TCTA has the second-largest share, with 43 billion rand.
Consecutive years of abnormally hot weather and below-average rainfall, which the government has partly attributed to climate change, have strained South Africa's already-stretched water supplies, making funding for infrastructure backlogs even more pressing.
During a presentation of its delayed 2019/20 results, the TCTA said it had negotiated with lenders for the 15 billion rand it needs by May to fund a bond redemption and continue construction of the Lesotho Highlands Water Project.
"There were other takers, but they were outside the range in terms of how expensive their money is," said TCTA's chief executive, Percy Sechemane.
Treasury has yet to approve the request to guarantee the borrowing, the TCTA said. TCTA has also negotiated 4.5 billion rand from African Development Bank and New Development Bank (BRICS Bank), also awaiting government guarantees.
"Everybody wants to give you money only on the basis that it's government-guaranteed," said Sechemane. "But if you look at the performance of some of the other SOE's, you have a potential cross default clause."
State-owned agri-lender Land Bank missed payments on 50 billion rand of debt in April, raising fears of a cross default and a call on all SOE debt.
"Rightfully, treasury was a bit nervous and worried when we said that each of our projects needs to be looked at separately," Sechemane said.
The balance of the TCTA's funding requirement, around 12 billion rand, will mostly fund the Mokolo Crocodile River (West) Augmentation Project.
It will supply water to coal miner Exxaro Resources Ltd , Eskom's Medupi power station, and possible new mines and independent power projects in the coal-rich but water-deprived northern Limpopo province. ($1 = 14.9068 rand)