Brics bank to lend up to R11.2bn to Eskom

The NDB, backed by Brics, is in talks with government about providing loans to Eskom.
The funding planned for Eskom will make up most of the $900m the NDB will extend in South Africa in 2019. Picture: Waldo Swiegers, Bloomberg

The New Development Bank plans to lend as much as R11.2 billion to Eskom for infrastructure projects this year as the ailing South African power utility battles to keep power supply steady.

Eskom, which on Wednesday entered a seventh day of controlled power cuts, is contending with operational and financial challenges, threatening the productivity of Africa’s most-industrialised economy. The government is considering various interventions to turn the company around, including a R23 billion bailout over three years and splitting the organisation into three parts to help contain costs.

Read: Huge struggle ahead to overcome Eskom crisis – Gordhan 

The NDB, back by the so-called Brics nations of Brazil, Russia, India, China and South Africa, is in talks with the government about loans that could alleviate some of the pressure on the country’s electricity grid, the lender’s president, K.V. Kamath, said by phone.

The development institution is rolling out a R2.5 billion loan to Eskom to build transmission lines and is considering two further projects in 2019, he said. The first is a R6.9 billion loan that will pay for retrofitting flue-gas desulfurization equipment to make the Medupi power plant compliant with new environmental standards. The second is a further R4.3 billion facility to improve the country’s battery-storage capacity, Kamath said.

Critical infrastructure

“Power is now a critical element in South Africa’s infrastructure and at this point in time it is imperative that we work with the government in alleviating this problem,” Kamath said. Medupi will have about 4 800 megawatts of installed capacity once completed.

The plan to split Eskom into generation, transmission and distribution units is heartening, Kamath said. “We are equally clear that this won’t happen overnight, so there is always a need to extend a hand during the transitioning process and that’s what we are doing.

The funding planned for Eskom will make up most of the R12.9 billion the NDB will extend in South Africa in 2019. By the end of the year, the lender will have roughly R34 billion of loans in the country, Kamath said. Eskom didn’t respond to requests for comment.

The NDB was started in 2015 to support sustainable infrastructure projects across its emerging-market members. The Shanghai-based bank will have extended $7.5 billion to $8 billion across its members by the end of year, bringing its total to assistance to Brics nations to about $15 billion.

© 2019 Bloomberg L.P


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That’s fine, but remember a loan must be REPAID. With the death spiral Eskom is in, and their current business-model of requesting users to USE LESS elect consumption, there is NO WAY Eskom will be profitable ever!

It only means the SA TAXPAYER will repay that loan.

Or if not, a national debt default years down the line.

Agree – and there seems to be no information of the terms of the loan…..pricing, security, tenor, repayment schedule. This could be another of Eskom’s quick fixes that ends up costing tax-payers and/or electricity consumers a lot of money.

100% agreed! Since the utility is public, surely we deserve to know the terms, interest rates etc.

Since Eskom knows they’ve got the CR put option (too big to fail) in place paid by taxpayers, what’s to stop them from borrowing unlimited at whatever rates?

Watch your pension money. They will have to find interest and capital repayment somewhere. If you are near using a LA get as much as you can into foreign funds. ANC only knows looting

The National Credit Act prevents politicians and managers in charge of Eskom from taking on more credit in their personal capacity. So, they merely sidestep the NCA and they take on unlimited credit in their “professional” capacity.

BEE and cadre deployment means that the cash ends up with the same individuals anyway. What it boils down to is this – the ANC’s idea of a Developmental State is simply a mechanism for looters to pocket the proceeds of loan agreements while the general public is contractually obliged to repay it.

Beautiful isn’t it? Luthuli House is a “sophisticated” financial institution that facilitates loans to cadres by offering the country as collateral and forcing the public to repay it.

This is merely an extension of the typical Tragedy of the Commons system of collectivist ownership – the proceeds and profits are internalized for the benefit of the most unscrupulous individuals, while the costs are externalized to divided amongst the public. Eskom is a prime example of the economic principle of “The Tragedy of the Commons”. Its failure is built into its DNA.

Sorry, I’m not aware of a clause in the National Credit Act that prevents anyone – politicians and managers included – from taking on “more credit”…?
That act does however regulate reckless lending by banks and financial institutions – not the Brics bank, however.

Could you give more information about how the NCA prevents one from taking on “more credit?”

Reckless lending is the act of extending credit to a person who does not have the means or ability to repay it. The aim is to protect individuals from over-indebtedness. The act prevents individuals from taking on more credit than they can repay, by limiting the amount of credit that institutions can lend to that individual. Most ANC politicians and cadres are over-indebted, and therefore unable to take on more credit. This is what the uprising against the independence of the Reserve Bank is about.

Great-should last the cadres and unions a week or two.

And the early warning system to detect leaks in the boilers? This service apparently just ground to a halt 18 months ago when someone forgot to reappoint the contractor!
Please Brics Bank and Eskom, could you fix that too along with all the other terrific plans for 2019? LOL!
(Meanwhile, like a cartoon says, SA’s fourth industrial revolution is being celebrated with candles and pre-packed sandwiches that don’t need to be eaten warm!)

End of comments.



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