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SA to bail out Eskom without taking on debts

Government to provide Eskom with R69bn, and will not take on the R100bn of debt as requested by the utility.

South Africa will give power utility Eskom a total of R69 billion ($4.88 billion) but will not take on R100 billion of debt as requested by the struggling firm, finance minister Tito Mboweni said on Wednesday.

President Cyril Ramaphosa wants to reform Eskom, which generates 95% of South Africa’s electricity but is drowning in R420 billion of debt, to lift the economy before an election expected in May.

The rand extended losses in response to a budget statement that also forecast wider deficits, rising debt and slower economic growth. Government bond yields gained.

In an effort to make Eskom more efficient, Ramaphosa said earlier this month the utility would be split into three separate entities – generation, transmission and distribution.

In its 2019 budget, Treasury said the first step in splitting Eskom would be to transfer a portion of the utility’s assets to a new transmission subsidiary that will invite the participation of strategic equity partners to provide capital and strengthen oversight.

Further financial support to Eskom would depend on economic growth, electricity tariffs and the implementation of the company’s strategy, Treasury said in its 2019 budget statement.

Eskom Chairman Jabu Mabuza last year urged the government to take on R100 billion of the utility’s debt, but Mboweni ruled this out.

“Pouring money directly into Eskom in its current form is like pouring water into a sieve,” Mboweni said in his budget speech.

“I want to make it clear: the national government is not taking on Eskom’s debt.”

Eskom subjected South Africa to the worst power cuts in several years last week due to plant-related problems, diesel shortages and planned maintenance.

The outages exposed the risks to the South African economy from Eskom’s virtual monopoly and the failure of successive government to take on labour unions and leftists in the ruling African National Congress (ANC) who oppose job cuts.

“We have had very, very difficult conversations with the ratings agencies … if we are doing practical things to fix Eskom – the electricity sector – in my view, that should be viewed as positive,” Mboweni told journalists ahead of his speech. 

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I supposed this is the “deficit neutral” accounting concept that is used by treasury?

Now, what’s the difference between giving Eskom R69bn bailout, or taking on the same debt?

It will still cost the State (i.e. the taxpayers).

The difference is.. taking on debt is just a slightly quicker way to Moody’s JUNK status downgrade.

Tito is clearly not a man to mince his words: “Pouring money directly into Eskom in its current form is like pouring water into a sieve,”.. which is why we are giving them R69 billion.

Shapiro cartoon??

He is just playing with words sadly. Amounts to same thing. The taxpayer will have to pay for gross ANC corruption and incompetence.

Passed the budget that is still milking the individual taxpayer by not adjusting essential expenses allowances and rebates –

Something that I would really like to know is:
* How is the eskom R400 billion made up, in otherwords – who are the creditors by name and
* does all the individual creditors tie up to R400 billion
* If so, provide the original loan contract signed by both parties involved;
* who was / were the representative/s of eskom who signed such contracts [assumed it was approved a the highest level at a board meeting – need the signed minutes of that meeting too];
* confirm that the actual loan was received by eskom in full or paid to an indepented 3rd party [no connected organisations & is the 3rd party a genuine 3rd party???] on eskoms behalf;
* check interest rates etc etc;
* How reliable / complete is any report from eskom’s own internal auditors – can any external auditor firm put any value to work done by eskom’s own internal auditors???

Next thing would be the overstaffed [not overworked] personnel to check – are all the personnel actually physically working at eskom and or are some just on eskom’s payroll to draw a salary – if sassar people could do it, what prevents eskom or for that matter any other organisation, especially government organisations, to do the same???????????? – if false birth certificates, ids, tax numbers, fire arm licences, drivers licences etc could be created / issued in the past this makes it just some much easier – once again in government organisations, in the private sector it revolves around generating profit and not how to spend taxpayers hard earned money – not 1 worker too many in a private sector company

Reason for these questions are the way eskom is operating / slipping up continuously in technically terms, it does not prevent them to make financial slip-ups as well – once again R69bn to the cost of the taxpayer – the minister can call it whatever he likes to call it – it is still at the cost of the taxpayer, no government is generating money by itself.

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