South Africa's banking industry would be able to withstand a default by Eskom, but the impact on pension funds is a concern for the central bank, Governor Lesetja Kganyago said.
The power utility is laden with about R500bn of debt, roughly equally divided into bonds and loans, according to data compiled by Bloomberg from public records, and is struggling to meet demand for electricity from aging and unreliable plants.
"What would a default of Eskom mean for the financial sector?" Kganyago said to reporters in Pretoria on Thursday after announcing the latest interest-rate decision. "We stress-tested these things and the exposure of the financial sector to Eskom showed that the sector will be able to withstand this."
Still, the possible negative effect on the wider market through bond holdings can't be ignored, Kganyago said.
"Eskom is funded through the issuing of bonds rather than direct bank lending and with that issuance of bonds then the thing spreads to who owns the bonds and then you are into insurance companies, and you are into pension funds and it is that connectedness then that you start to worry about," he said. "Suffice to say though that this is just a scenario, Eskom has not defaulted."
President Cyril Ramaphosa has said that Eskom is "too big to fail".