South Africa’s Treasury briefs Parliament on the Eskom Debt Relief Bill

  • South Africa’s state owned energy utility, Eskom, will have received close to half a trillion rand in state support almost two decades since it started imposing debilitating nationwide blackouts in 2008. 
  • The series of cash injections and a planned takeover of a portion of Eskom’s loan portfolio will amount to R495.6 billion in the fiscal year through March 2026.
  • Eskom has unsustainable debt of over R400 billion largely due to poor planning, poor management, incompetence, corruption, looting and sabotage over the last decade under both the Zuma and Ramaphosa governments.
  • The country faces rolling blackouts of up to 10 hours daily. Read more

Last month the Chairperson of the Standing Committee on Public Accounts (SCOPA), Mr Mkhuleko Hlengwa, commented on the preconditions now preceding the new round of financial bailouts, saying these bailouts are seemingly based on a misalignment of issues of principle. “As a result, we often dispense financial solutions to non-financial problems.”

More alarmingly, Mr Hlengwa said, when new terms and preconditions are put in place a new crisis is engineered. Eskom is a case in point, he pointed out. “We are suddenly faced with an engineered crisis at Eskom that has not only led to rolling black-outs, but that led to the categorisation of Eskom’s inability to generate and supply energy as a national disaster.” One wonders how binding these new preconditions are and the management regime they are they subjected to, he asked.

Yesterday, the country’s National Treasury briefed Parliament on the R254 billion Eskom Debt Relief Bill. They explained the terms of the bill is aimed at strengthening the utility’s balance sheet, enabling it to restructure and undertake the investment and maintenance needed to support security of electricity supply. The debt relief can only be used to settle debt and interest payments. Eskom currently has R423 billion debt on its book. The utility is effectively paying interest on its interest. Read more

Related news: Eskom bailout must be meaningful and all creditors must be treated fairly

The key features of the tax payer bailout arrangement includes government providing Eskom with advances of R78 billion in 2023/24, R66 billion in 2024/25 and R40 billion in 2025/26.These advances will cover capital and interest payments as they fall due and may only be used for that purpose. In 2025/26, government will directly take over up to R70 billion of Eskom’s loan portfolio. 

As a major shareholder, Treasury has appointed an international consortium with extensive experience in the operations of coal-fired power stations to review all plants in Eskom’s coal fleet and advice on operational improvements. The review is scheduled to conclude by mid-2023. Eskom is required to implement the operational recommendations emanating from this independent assessment. This will include a determination of which plants can be resuscitated to original equipment manufacturers’ standards, following which Eskom must concession all these power stations with clear targets for the electricity availability factor and operations.

Watch the video for the full brief.

Author: Bryan Groenendaal

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