South Africa’s state power monopoly says it will need to charge consumers more for electricity if it is to cut its debts and stave off bankruptcy, even as rolling blackouts continue to plague Africa’s most industrial nation.

Years of corruption and mismanagement under disgraced former president Jacob Zuma left Eskom with surging costs, falling revenues, a fleet of breakdown-prone coal power stations and ballooning debts.

Eskom’s roughly R460bn ($32bn) debt has throttled investment in South Africa’s creaking power supplies and will be a major priority for President Cyril Ramaphosa next year, as he seeks to reboot an economy hit by the pandemic and undermined by persistent power cuts.

André de Ruyter, chief executive of Eskom, which generates nearly all South Africa’s power, told the Financial Times the lossmaking utility needed “cost-reflective” tariffs alongside debt relief of more than $13bn to avoid a collapse that would pose a huge risk to the economy.

Making the case for higher prices, Mr de Ruyter, a veteran of top South African companies who joined Eskom last year, said: “You cannot have a business that tries to sell its product at below its cost of production . . . it never works — and it cannot work in the case of Eskom.”

Before municipal and other surcharges, Eskom's average standard will rise next year to just under $0.10 per kilowatt-hour, similar to India and China but less than half the tariffs in many European countries. The country’s energy regulator sets the base tariffs.

Business and labour groups agreed this month on the need for “a strategy” to reduce Eskom’s debt, but there is disagreement over how to do this. Eskom already relies on state bailouts equivalent to R1bn a week to repay its debts and remain a going concern, a figure that will total about R226bn between 2020 and 2026.

Mr Ramaphosa’s government has considered taking over a portion of the company’s debt. But if Eskom continued to drain cash, the efforts would be pointless, Mr de Ruyter said.

“We recognise as Eskom that we have no right to anybody’s money. We can’t go and demand pension fund money, we can’t go and demand equity injections,” said Mr de Ruyter. “What we have been advocating for as a more equitable way of ensuring the sustainability of Eskom is cost-reflective tariffs.”

Eskom is not seeking “subsidies for money corruptly spent” but it needs higher tariffs to refurbish ageing and failing coal plants at the heart of the blackouts and invest in newer supply, as it faces a power generation gap over this decade, Mr de Ruyter said.

South African businesses already hard-pressed by the pandemic and lockdown measures are likely to push back against having to pay more for electricity.

Mr Ramaphosa’s government and Eskom must tread carefully with any debt plan. Rating agencies could class it as default if they judged creditors were being made to accept a restructuring that imposed losses on their debts.

Restructuring “is not at all what we are contemplating” and all of Eskom’s debt will be repaid, Mr de Ruyter said. “The debt isn’t going to go away . . . in a debt to equity conversion, that equity will have to be serviced,” he said.

This year South Africa’s Public Investment Corporation, Africa’s biggest asset manager that oversees government employee pensions, tabled a draft proposal to swap nearly R100bn in Eskom bonds into shares in the utility.

The PIC told the FT that it was “investigating a wide range of possible options in this regard, in light of the impact of energy security on all investments”.

“Whatever solution the PIC eventually supports, if any, will be informed” by the investment mandates of the pension fund clients and their appetite for risk, it added.

Analysts have said that such a swap would risk ending up with worthless shares if Eskom lacks the cash to pay dividends, and may also be classed as a default.

An offer to investors to swap their Eskom bonds for sovereign paper would be more effective because Eskom debt is already widely seen as a de facto government obligation, said Peter Attard Montalto, an analyst at South Africa’s Intellidex research firm.

Mr de Ruyter said Eskom was also looking for cheap loans from global development banks in return for the faster decommissioning of decrepit coal power plants. “We have had a number of discussions . . . there is an extraordinary amount of money available to fund decarbonisation,” he said.