The rand is on a downward spiral following Moody’s statement regarding Eskom’s financial results.
On Tuesday the rand lost 20 cents to the dollar.
Eskom face many challenges in meeting their debt obligations without government assistance and ratings agency Moody’s said an urgent turnaround plan is required.
Eskom’s financials revealed a loss of R20.7-billion for the 2018/2019 year which means government’s planned cash injection of R105-billion over 2020 and 2021 will only bring stability to the power suppliers debt burden.
Moody’s predicts that over the next financial year Eskom’s financing costs will exceed their operating cash flow meaning that it is not sustainable unless an urgent longer-term turnaround plan is implemented.
Currently Moody’s has South Africa one notch above sub-investment grade, Baa3, and anything below that, such as Ba1, Ba2 or Ba3 will put us at junk status.
Should the country slip below investment grade, foreign investors will cease investing. Investors are already starting to pull out of billions of rands investments.