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SA forced into emergency aid payout to troubled Eskom

Documents show the government was forced to pay R5bn in emergency funds so Eskom could meet obligations.

Less than a week after the boss of South Africa’s Eskom declared “the days of surprises are over,” documents show the government was forced to pay R5 billion ($355.2 million) in emergency funds so the state-based utility could meet obligations.

Read: Eskom CEO says ‘days of surprises’ over as power plans in place

The payment on April 2 was intended to let Eskom pay bills due at the end of March, and avoid a call on its existing guarantees after a loan expected from the China Development Bank failed to come through in time. The amount repaid a R3 billion bridge loan from Absa, according to a letter to parliament from finance minister Tito Mboweni and released by the opposition Democratic Alliance.

“The key here is that this news has been buried in parliament, though in the public domain it is exceptionally hard to find out, and not communicated openly with Eskom creditors,” said Peter Attard Montalto, head of capital-markets research at Intellidex. “Eskom is operating much closer to the edge than most investors realize. Given the blanket National Treasury guarantee this is not an issue for Eskom, per se, but it is for the sovereign.”

Government bailout

The government announced a record R69 billion bailout for Eskom in February to be paid over three years. Of that, R23 billion is pledged for the current financial year. Based on the 2% limit of the appropriated national budget, only R17.7 billion can be transferred. The remaining balance will have to be subjected to the normal appropriation process when parliament is constituted after the May 8 election.

Read: Eskom gets R17.7bn of planned support

The R23 billion required a special bill that didn’t come up before parliament completed its business before the election. The National Treasury had targeted disbursement between August and October 2019.

“Because were are in recess for the election period we can not process any new bills which have to go through a proper procedure of consideration and engagement with stakeholders,” Pinky Phosa, chairwoman of the National Assembly appropriations committee, said by phone from Johannesburg. “The new parliament will have to consider these reports once it takes over.”

Risks cited

President Cyril Ramaphosa is under pressure to chart a new strategy for the money-losing utility while retaining the support of trade unions ahead of the vote. He also needs to preserve South Africa’s sole investment-grade credit rating with Moody’s Investors Service. Rating companies have cited Eskom as one of the biggest risk to the sovereign.

Mboweni warned that Eskom doesn’t expect to be able to generate enough internal cash to meet its obligations over the next five years. The government and Eskom are in talks on how to secure the company’s “long-term financial sustainability.”

“Even after accounting for funds raised, cash flow is not adequate to fund its capital expenditure program,” he said.

Adrian Lackay, spokesman for public enterprises minister Pravin Gordhan, said the ministry was “confident” that the China Development Bank would carry out its commitment to help capitalize Eskom.

© 2019 Bloomberg L.P
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Its a crying shame that the current board and management are no different to the previous bunch of incompetents persons. Maybe its about time government stopped bitching about transformation and concentrated on running SoE’s on performance based lines and employed the best people to manage these entities whether they be black white or pink but please stop cadre deployment

Leading up to the election the ANC are going to put a band-aid on this mortal wound but wait… sooner or later the economic and financial truth of the Eskom (in)competence, transformation (read ‘racism’)and looting (read ‘theft”) experiment will have to be borne. While Apartheid discriminated against Blacks the destruction of this country under the ANC is sparing no one.

My opinion about Eskom and the ANC can’t be posted here. I will be banned.

You do of course realise this wont end.
The ONLY solution is to privatise Eskom.
The new investors will;
* Retrench 50 % of staff.
* Stop the stealing
* Get competent staff
* Get staff to work for the money they are being paid.
* Plan (properly) fir the future.

UNFORTUNATELY THIS WILL NEVER HAPPEN.

Solution, – implement solar, now!

I think that there are many who feel the same. The irony however is that it won’t make any difference.

Too little education
Too little foresight
Too little wisdom
Too much corruption
Then you have the ANC described above

Then you have our Eskom situation.

The ANC are not very good an much at all. One, thing in which they have demonstrated proficiency is their complete inability to manage and operate SOEs such as Eskom. Taxpayer money is being used to bail out Eskom and it is absolutely imperative that these billions come with some strings attached, principally that Eskom should get their house in order and become a wealth-generating not a wealth-consuming entity. This will include rightsizing and privatisation. When the IMF or World Bank bail out countries, this always comes with strings aka austerity. When SA receives its first bailout from one of these guys, the gravy train is going to grind to a halt. Guys, this is not an “if” but a “when”. Moody is currently allowing the ANC to kick the can down the road but when D day comes, Eskom is going to be firmly in their sights. The electricity generation entity will be on the auction block as the emasculated cash-strapped criminal ANC regime has its hands tied by forces with power of which their limited intellect cannot even comprehend.

The sooner the better. They are running out of money options very quickly now if not already no options left

What’s irritating is that the biggest mouths (Ramaphosa) about being “in control of the crises” are currently jetting around the country spreading election lies to the masses. Wonder what interest they’re paying to ABSA on this emergency funding – given the risk the bank is within it’s rights to charge a fat premium.

The great Ramaphosa put option is kicking in.

Should ESKOM work harder now that they have guaranteed bailouts from taxpayers? Of course not. Same for goes for DENEL, SAA, SARS and every non performing municipality.

What comes next is junk status, lower tax collections, prescribed assets, nationalizing the SARB, money printing, inflation, deep recession, unemployment spikes, land grabs, starvation… Zimbabwe.

The unraveling starts slowly and then suddenly quickly. Be prepared

My only reasoning for why Moody’s did not junk SA is that they are giving offshore investors more time to get their cash out. SA government and all its entities including Eskom are junk which deserve to be in the dustbin.

Expect multiple “emergency” bailouts for the rest of the year.

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