South African parastatal reforms may underwhelm

Significance

More bailouts for Eskom and other cash-strapped SOEs come amid an ongoing exodus of senior executives. This has raised renewed questions about the willingness and ability of President Cyril Ramaphosa’s administration to implement the bold reforms needed to make SOEs financially and operationally sustainable.

Impacts

• The increasingly politically charged nature of SOE leadership will make recruitment of competent officials and directors more difficult.
• New SOE bailouts may require further tax hikes and put pressure on the electricity regulator for even higher electricity price increases.
• Concerns about power supply will continue to weigh on investment and already subdued economic growth prospects.