Tito Mboweni gives Eskom R59bn lifeline, on top of February's R69bn
Finance minister Tito Mboweni has tabled a special appropriation bill to provide an additional R59bn to Eskom to help the debt-ridden power utility meet its financial obligations in the current and next financial years.
The special bill will provide funding from the National Revenue Fund to allocate an extra R26bn to Eskom in 2019/20 and R33bn for 2020/2021. This is on top of the R69bn that the energy company was allocated in the national budget in February.
“I stated before during my budget vote that Eskom presents the biggest risk to the financial fiscal framework because of its financial difficulties and its negative impact on the lives of ordinary South Africans,” said Mboweni while tabling the bill on Tuesday.
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“Given the risks to the economy of the systemic failure if Eskom were to collapse, the government is working urgently to stabilise the institution while developing a broad strategy for its future,” he added.
Mboweni said the serious financial and operational challenges faced by Eskom were, to a large extent, caused by governance challenges which were playing themselves out at the Zondo commission. The entity previously experienced many difficulties and a decline in investor confidence.
“As it stands Eskom is not financially sustainable based on its high debt and its inability to generate sufficient revenue to meet its operational and capital obligations which exposes the entity to high levels of liquidity and balance sheet stresses,” he added.
He said without major changes to Eskom's business model and financial assistance being provided by the government, the company would be unable to meet its financial obligations for the 2019/20 financial year.
“At a strategic level, we must just face the reality that a large vertically integrated energy company is an outdated model in a changing industry both domestically and internationally.
“We should also be reminded that the fiscal support we are announcing today will come at a significant cost to the fiscus and to South African taxpayers. In addition to financial support to Eskom there is also a preliminary indication that tax revenue could be significantly lower than budgeted for in the 2019/20 budget,” said Mboweni.
He said this could substantially increase the government's borrowing requirements for 2019/20 which would require government to revise its funding strategy and current weekly bond issuance levels before the medium term budget policy statement.
"I'm trying to indicate here, colleagues, that we are facing a very serious financial situation."
Mboweni said the future sustainability of Eskom would have to be addressed and its debt levels restructured and sorted.
Mboweni also revealed that he has been in talks with public enterprises minister Pravin Gordhan about the appointment of a chief restructuring officer and that pending finalisation of consultations, the restructuring officer may be announced later on Tuesday.
The bill has been referred to the standing committee on appropriations for consideration.