Lesetja Kganyago, the South African Reserve Bank Governor/Bloomberg

Economy

South African lenders can handle potential Eskom default, say central bank governor

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The power utility is laden with about $35 billion of debt, roughly equally divided into bonds and loans and is struggling to meet the demand for electricity from ageing and unreliable plants.

Sunday 26, May 2019

(Bloomberg) – The Governor of South Africa Reserve Bank Lesetja Kganyago said that the banking industry will be able to withstand a default by Eskom Holdings but the impact on pension funds is a concern for the central bank.

Lesetja Kganyago, the Governor of South Africa Reserve Bank, said, “What would a default of Eskom mean for the financial sector?”

“We stress-tested these things and the exposure of the financial sector to Eskom showed that the sector will be able to withstand this,” Kganyago said.

Kganyago added that the possible negative effect on the wider market through bond holdings cannot be ignored.

“Eskom is funded through the issuing of bonds rather than direct bank lending and with that issuance of bonds then the thing spreads to who owns the bonds and then you are into insurance companies, and you are into pension funds and it is that connectedness then that you start to worry about,” Kganyago said.

President Cyril Ramaphosa has said that Eskom is too big to fail.

 

TAGS : Lesetja Kganyago, South African banks, Eskom , President Emmerson Mnangagwa

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