Dangers of defaulting

What happens if Eskom defaults on its R33 billion loan?

This is a question many are asking and which led to the DA demanding answers from Eskom.

Considering what has happened in other countries, this is a question worth serious consideration.

In Sri Lanka, the government has handed over its deep-sea Hambantota port – as well as 15 0000 acres of land – after battling to meet its repayments on the near R23 billion loan to build the port.

The deal also goes toward helping the tiny country (65 610km²) repay its massive debt to financiers around the world.

The New York Times claimed “the government is expected to generate $14.8 billion in revenue, but its scheduled debt repayments come to $12.3 billion”.

“The case is one of the most vivid examples of China’s ambitious use of loans and aid to gain influence around the world – and of its willingness to play hardball to collect,” the Times wrote.

The China Development Bank loan to Eskom came about at the 7th Forum on China Africa Co-operation held in Beijing this year and “serves as the official summit between the Chinese president and African heads of state, and results in major policy and financing announcements,” the China Africa Research Initiative at the Johns Hopkins University School of Advanced International Studies said on its website.

According to the Washington Post, Beijing is paying more than lip service to African aspirations.

“Often with support from Beijing, Chinese companies have been building special economic zones in Africa, creating platforms where Chinese and other firms can cluster together.

“In 2015, at another Johannesburg summit, [President Jinping] Xi promised $10 billion toward a China-Africa industrial capacity cooperation investment fund,” said the Post.

In June, Quartz Africa reported China was strengthening its military presence in Africa.

“At a time when the United States and European countries are adopting isolationist policies, Beijing is making power moves abroad, for example by opening up its first overseas military base in Djibouti,”

Quartz wrote.