South Africa is considering either partially privatising state-owned utility Eskom or putting up some of its assets for sale in order to secure funding for the power producer and resolve an energy crisis, the Treasury said on Wednesday.

The proposal could revive previous plans to raise funds for the company, which is battling the worst power supply shortages since 2008 and faces a funding crunch as it races to bring new power plants online.

South Africans are subjected to frequent rolling power cuts which Eskom imposes to prevent the grid from collapsing.

“Given Eskom’s constrained balance sheet and government’s constrained fiscal position, there is a need to explore all options,” the Treasury said in a statement.

“Consideration is being given to ring-fencing and selling stakes in Eskom’s non-core businesses or power stations as well as into Eskom’s business as a whole.”

The government would still retain control of the company, the statement said, and authorities would also consider amending regulations to allow private firms to generate electricity for their own use and sell any surplus to the national grid.

Another option could be increasing private generation by independent producers. Some 5.2 gigawatt has already been procured through that initiative.

The Business Day daily reported on Wednesday that Treasury Director General Lungisa Fuzile had said government had revived a discarded policy that stipulates the private sector could take a stake of up to 30 percent in Eskom’s power-generating assets.

Suspended Eskom CEO Tshediso Matona said in March the power firm may sell assets to raise capital.

Left-leaning elements of the ruling African National Congress and unions have opposed privatisation of Eskom, arguing it would lead to job losses and undermine efforts to expand grid access to more black South Africans.

Eskom’s funding gap to 2018 is estimated at 200 billion rand ($17 billion) and the utility expects to receive a 23 billion rand cash injection from the government this year.

The utility has applied to the energy regulator to hike electricity prices to 25.3 percent from July this year. Its spokesman said this could earn Eskom nearly 40 billion rand if approved.

The energy regulator said on Wednesday it would hold public consultations on Eskom’s application and a decision will be made by end June, with any price increases likely to come into effect by September.

 

Source: Reuters