Eskom's Next Crisis, And Why Resolving It Will Be Require 'tough Trade-offs'

It's a debt pile that continues to mount as municipalities themselves fall behind in collecting revenue from customers. With R95.4-billion owed as of November, the arrears could jeopardise Eskom's plans to spin off its distribution unit, a move that it says is key to boosting efficiency and securing investment.

It could also put at risk investors' new-found goodwill towards a company that was seen as symbol of chronic dysfunction but is now about to turn its first profit in nearly a decade. Blamed for years of rolling electricity blackouts, it's managed to keep the lights on for nine months in a row, offering hope to the power-starved economy.

Investors have responded to the improvements by demanding lower premiums to hold Eskom bonds. But many, like Olga Constantatos at Futuregrowth Asset Management, are urging urgent action on the non-payments issue.

"The municipal debt problem is of ongoing - and growing - concern," Constantatos said. "The growing scale of the problem requires immediate and decisive interventions and some tough trade-offs by government, which historically has been a challenge for this and previous administrations."

The power issue is one of the biggest challenges for the new South African government, which took office last year on an agenda of reform aimed at rooting out corruption and kick-starting economic growth.