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Pressure mounts for Eskom, Transnet to reveal Chinese loan terms

Both state-owned enterprises refuse to reveal the interest rates of loans from Chinese financiers.

Details surrounding commercial loans secured by state-owned companies Eskom and Transnet from Chinese state banks, which were announced with fanfare at the start of the 10th Brics summit in Johannesburg on Tuesday, have been cloaked in secrecy.

As part of efforts to strengthen the balance sheet of embattled state-owned entities, Eskom secured a $2.5 billion (R33.2 billion) loan from the China Development Bank, while the Industrial and Commercial Bank (ICB) extended R4 billion to Transnet.

Both loans have been described as “normal commercial loans” that are guaranteed by the government, which Eskom will use to fund the construction of the Kusile coal-fired power station. Meanwhile, Transnet will deploy the funds for “general corporate uses”, providing the port and freight-rail operator “with liquidity in the near term”.

Although Eskom and Transnet were more than happy to disclose details of the loan repayment periods, both refused to disclose the interest rate agreed with the Chinese banks. Eskom said the loan is repayable in 15 years while Transnet’s loan repayment period has been pencilled in at five-and-a-half years.

Eskom spokesperson Khulu Phasiwe said the power utility cannot disclose the interest rate “due to commercial reasons”.

“It was a favourable rate,” he told Moneyweb.

Transnet didn’t respond to Moneyweb’s question about the interest rate on its loan with the ICB. Asked if there were conditions tied to the loan, a Transnet spokesperson said there were “no conditions”.

Loans of this nature typically have conditions attached. In the case of Eskom, for example, the condition would be for it to enter into a service agreement to purchase Chinese inputs or technology in the production of electricity. Essentially, SA would be tied into import agreements with China.

Deputy minister of international relations and cooperation Reginah Mhaule said SA and China are benefitting “equally” from the loan agreements. “I don’t think there are strings attached [to the Eskom and Transnet loans]. We are one community under Brics. We are bringing the whole of Africa into Brics and not just SA, thus the continent is benefitting,” Mhaule told Moneyweb.

“From a distance, it may seem that China is benefitting. But I am seeing both countries benefitting equally. The Chinese are transferring their money and skills so that the South African economy can grow. We are benefitting.”

Market watchers who have observed the Chinese state-owned bank model said a bank like the China Development Bank, which provided funding to Eskom, could provide lower interest rates and longer-term loans than other commercial Chinese banks. This is due to the fact that the Chinese state has full ownership of the China Development Bank and implicitly guarantees its debt, giving it the firepower to take on larger risk.

Eskom and Transnet, which are facing credibility issues and difficulties in raising money on debt capital markets following their involvement in the corrosive state capture project, faced increased pressure on Wednesday to unveil the terms of their loans.

“A loan of this magnitude, with more to come, must be as transparent as possible,” says Natasha Mazzone, the Democratic Alliance (DA) spokesperson for public enterprises. “This is especially important given that the taxpayer will most probably have to foot the bill when it is time to make repayments, with future electricity tariff hikes expected.”

Mazzone said the DA would write to the chairperson of the Eskom board, Jabu Mabuza, to request that Eskom make the terms of this loan public, particularly the repayment terms of the loan, the agreed-upon interest rate, and the guarantees provided to the bank.

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And this is what SA got – Loans that is “cloaked in secrecy” but can be described as “normal commercial loans” which ” has favourable rates” with “no conditions” attached, that led them to believe there are no strings attached,…the start of the New Dawn frenzy at the “normal cadre-cial loans” cloaked in secrecy trough, this is what ANC transparency looks like.

It is now or never to fix Eskom. If Eskom goes down, so does South Africa.

Apparently, Eskom needs 25% yearly increases?
Eskom has double the number of employees required according to the World Bank?
Some employees are paid four times more than they should?

!!! WHAT A DISASTER !!!

Proudly brought to you by your A N C Goverment!!

Given the evidence and historical inability of the ANC to manage SOE’s, what reason is there now to believe that these loans are not going to come back and bite us, the taxpayer, where it hurts most. To add fuel to the fire, the conditions of the loans are clouded in secrecy???????? The natural tendency for me would be to make provision for a break from Eskom through alternate energy supplies and I’m sure so many other people with the means to do so in this country will follow, resulting in a bigger headache for Eskom. Scary where we’re headed under the circus mentality of the clown show.

Colonization began as trade and mutually beneficial agreements. Eventually the colonizing nation had to send in the army to enforce the “mutually beneficial” agreements. After fighting for independence from Western colonization, African countries now welcome Eastern colonization. Why is independence so short-lived for African countries, while it lasts for ages in other nations? People with a slave mentality always succeed at enslaving themselves. The sense of entitlement combined with the refusal to take responsibility, inevitability leads to enslavement. The Freedom Charter is the enslavement manual.

They despise WMC but grovel and salivate at the feet of YMC – and they cannot explain the difference other than though skin colour – beware anc, the Chinese hold Africans in the highest contempt!

Cyril and quite a few other cadres etc may have to learn how to say “ja baas” in all the Chinese dialects.

accept it now and spare yourself a lot of pain:

eskom and transnet does not belong to SA anymore.

moving on … … …

Of those who want the loan terms made public, please provide an example where loans terms can be made public without jeopardising either party in the agreement.

Some of you find acceptable that the very same Eskom should keep confidential the agreement terms it had/has with BHP Billiton relating to the electricity supply agreement.

Disclaimer: I am neither for nor against the publicising of the loan terms.

Dear TB4U-not very logical to state an opinion and then disown it?? At least the Billiton agreement was not to try and replace R20+billion money stolen by corrupt ANC cadres.

I think that, as taxpayers, we are all effectively guaranteeing these loans – so we have a vested interest. Besides, it makes for good corporate governance, where there has been none.

Bet the anc also gave the Chinese the Simonstown Naval base as part of the deal – as for the money, it’s gone already to fill the massive holes left by the anc ‘s looting, fraud and theft!…wash, spin, repeat, anc money laundromat style.

My guess is that the priority was not to fill those holes. That was second on the list. Top of the list was the 2019 ANC election budget. Now they’re smiling. See?

They are USING DEBT TO PAY DEBT! This goes against ALL principles of becoming financially independent we @ Financial Fitness have taught for 22 years. Most of our corporates we teach listen. NOW it’s the government that doesn’t????I can tell you where we go from here.

…where we go from here, you say?

G R E E C E

πάνω από τον δημοσιονομικό βράχο (‘over the fiscal cliff’)

Save the Taxpayer, please take Eskom and Transnet.

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