The rand strengthened as much as 0.7% against the greenback, but was little changed shortly after Godongwana was done speaking. The yield on South Africa’s most liquid debt due 2026 did hold a decline, in a sign that investors are optimistic that the plan to transfer Eskom's debt to the state won’t have a dramatic effect on the government’s overall debt metrics.
The proposals went some way toward appeasing investors, but would still have the effect of seeing government debt stabilize at higher levels, said Robert Hoodless, an FX strategist at InTouch Capital Markets in London."The devil will be in the detail, and ultimately Eskom and wider South Africa must deliver on the promising words in the budget," he said.
The government will provide Eskom with three annual advances totaling 184 billion rand through March 2026 to repay maturing debt and cover interest costs. The funding will be converted to equity if Eskom meets its performance criteria. The bulk of the transfers will be financed through additional borrowing, the National Treasury said.
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