Eskom’s borrowing costs fall as investors warm to turnaround

A measure of Eskom’s credit risk has narrowed to the lowest in a year as investors deepen bets that South Africa’s State-owned power utility has turned a corner after years of crisis.

The extra yield investors demand to own Eskom’s 2033 rand bonds rather than South African government debt has compressed to about 88 basis points from a high of 155 in May.

The gap has averaged 115 basis points over the past five years as the utility grappled with a debt burden and mismanagement that moved Goldman Sachs to describe it as the single biggest threat to South Africa’s economy.

The bond rally follows steady progress on Eskom’s restructuring plan, supported by the government’s R254-billion debt-relief package announced in 2023.

The utility has cut its total debt to R372-billion by March, from 412 billion rand a year earlier, and aims to lower that figure to R300-billion within two years, when it plans to return to debt