For a $3.6mn monthly sum, South Africa’s Eskom will help keep Zimbabwe’s lights on

After withdrawing Zimbabwe’s power export arrangement for failure to pay debts, South Africa’s public power utility, Eskom will start selling large quantities of electricity to Zimbabwe again. A deal which is expected to ease Zimbabwe’s biting power woes and make Eskom profitable.

For a weekly sum of $890,000 (R13m), Zimbabwe would receive 400MW of power from Eskom.

In a statement, Eskom noted that “Eskom can confirm that we have agreed on a payment plan for the outstanding debt and that proof of payment has been received.” However, the power utility and Zimbabwe Electricity Supply Authority (ZESA ) are at the late stages of concluding an agreement.”

Meanwhile, Zimbabwe’s information minister, Monica Mutsvangwa, in a post-cabinet briefing stated that “In terms of this arrangement, the government has commenced through treasury the payment of $890,000 per week towards the settlement of its debt with Eskom.” Mutsvangwa also noted that Zimbabwe was pursuing a separate arrangement to secure power imports from Mozambique.

Since this year Zimbabwe has had a power crisis resulting in up to 18 hours of load shedding a day. These instituted power cuts have crippled many companies and seen to the closure of many others. The overall economy is crumbling from the weight electricity shortage and a three percent contraction is expected this 2019.

Much like Zimbabwe, Eskom is in deep financial crisis and is unable to pay the interest on its R419 billion debt out of the revenue it generates. Since December 2018 the power utility has been seeking a bailout. The company requested that the government take on R100 billion ($7 billion) of its debt in 2018 and earlier today, August 7, struggling Eskom on a no-deal roadshow in London stated that it can only sustain R160bn rand of debt.

Currently, the power utility is acknowledged as the single biggest risk to South Africa’s economy by the Treasury, credit rating agencies and the investment community. The increasing debt and corruption scandals made investment bank Goldman Sachs to declare Eskom the “biggest risk to South Africa’s economy.” The company had R413 billion in debt and plans to raise an additional $26 million (R340 billion) by 2022; 8 percent of South Africa’s GDP.

According to the National Treasury, Eskom had utilized R295 billion of the guarantees offered by the government by the end of the fiscal year in March and the