President Cyril Ramaphosa December 4, 2018. REUTERS/Siphiwe Sibeko

JOHANNESBURG – A debt swap for cash-strapped state power company Eskom would spiral the country into more debt, South Africa’s President Cyril Ramaphosa said on Thursday, adding there was need to look at other options to shore up the company’s balance sheet.

President Cyril Ramaphosa gestures after announcing Shamila Batohi (not pictured) as the country’s new chief prosecutor, at the Union building in Pretoria, South Africa, December 4, 2018. REUTERS/Siphiwe Sibeko

Eskom, which has had to implement power cuts due to coal shortages and poor plant performance, said last week it wants the government to take on R100 billion ($7 billion) of its debts, about a quarter of its total borrowings of R420 billion.

“The debt swap that Eskom has come up with is just going to descend us into further deeper debt as a country, so we have said we need to look at other options,” Ramaphosa said in an interview on 702 Talk Radio.

“Eskom is very important for the life of our country and (on Friday) I will be announcing a task team that will be looking at Eskom in terms of the current difficulties.”

Ramaphosa said the team would, among other things, look into Eskom’s business and funding model and how the power utility should be structured.

Eskom supplies more than 90 percent of the country’s power.

Moving Eskom’s debt to the government’s balance sheet put South Africa’s sovereign credit ratings under pressure.

Moody’s is the last of the “big three” ratings agencies to have South Africa’s debt in investment grade, with S & P Global Ratings and Fitch rating South African debt as sub-investment grade.

“We are working very hard to upgrade ourselves and improve our investment rating. We want to get out of this downgrade situation,” Ramaphosa said.

(Reporting by Olivia Kumwenda-Mtambo; Editing by Jane Merriman)