Finance minister Enoch Godongwana has offered Eskom a huge debt relief to free it up to invest in power generation and warned defaulting municipalities that a culture of non-payment will not be tolerated.
In a budget speech focused on load-shedding woes, Godongwana on Wednesday said while the government would absorb more than half of Eskom’s debt, it would not take over the R56.3bn owed by municipalities to Eskom. This unless there is a clear plan on how to prevent them from defaulting in future.
Godongwana told MPs they were working with Eskom to provide incentivised relief to municipalities in distress. But this will have to come with conditions that include the installation of electricity prepaid meters in households for customers to pay for what they use.
“The culture of non-payment, not only by municipalities but by all organs of state and individual households, is concerning. Such behaviour undermines and cripples institutions and makes it impossible for them to deliver services,” Godongwana said.
The National Treasury will publish a circular in March to outline debt relief plans for municipalities and households. Business leadership said it was relieved to hear that concrete measures were being taken to address debt owed by municipalities to Eskom, as well as non-payment by residents.
The organisation also welcomed a debt relief plan that will see government absorb R254bn of Eskom’s R423bn debt to free the utility up to invest in power generation and improve its operational performance.
Godongwana said the idea was to improve Eskom’s balance sheet while restructuring and investing more in maintenance to support security of electricity supply.
“This consists of two components. One is R184bn. This represents Eskom’s full debt settlement requirement in three tranches over the medium term,” he told MPs.
“Second is a direct takeover of up to R70bn of Eskom’s loan portfolio in 2025/26.”
Because of the structure of the debt relief, Eskom will not need further borrowing during the relief period.
“Government will finance the arrangement through the R66bn baseline provision announced in the 2019 budget and R118bn in additional borrowings over the next three years.”
Eskom has since the 2008/09 financial year, when load-shedding first became a problem, received R263bn in government bailouts.
“These allocations have failed to stem the collapse of Eskom’s balance sheet and operations. The utility imposes and enormous drain on the economy and its debt stands at an unstainable R423bn,” the Treasury said in the budget review.
Business Leadership SA (BLSA) said the R254bn in debt relief was larger than expected and an acknowledgment of how critical it was to free up the power utility to operate more efficiently.
It said the markets were closely watching conditions attached to the debt transfer, with the first being that Eskom is required to prioritise capital expenditure in transmission and distribution during this period.
“BLSA believes that is a highly positive move towards increasing the country’s generation capacity, as the lack of transmission capacity has resulted in fewer renewable energy plants than planned being approved in bid window 6 of the renewable energy IPP procurement programme.”
Homeowners and business intending to invest in rooftop solar panels and other renewable energy sources to escape load-shedding could claim up to R15,000 in tax rebates, from March 2023, for installation costs of photovoltaic rooftop solar panels.
This was part of R13bn in tax relief proposals contained in the 2023 budget, of which R9bn goes towards rebates for investments in renewable energy.
Individuals who install rooftop solar panels from March 1 2023, will be able to claim a rebate of 25% of the cost of the panels, up to a maximum of R15,000. This can be used to reduce their tax liability in the 2023/24 tax year.
“This incentive will be available for one year,” said Godongwana.
The rebate will apply to individuals who purchase, install and get a certificate of compliance for the installation of solar PV panels between March 2023 and February 2024.
Households will receive a tax rebate to the value of 25% of the cost of new and unused solar PV panels installed.
Households will receive a tax rebate to the value of 25% of the cost of new and unused solar PV panels installed.
Meanwhile, the Treasury has flagged the high debt service costs now averaging R366.8bn a year. Over the next three years SA will spend a staggering R1.1 trillion on interest payments to bondholders and other lenders.
On the expenditure side, an additional R227bn was allocated over the next three years to go mainly towards Covid-19 social relief grant, safety and security, education, health services and investments in local government and provincial infrastructure.
Having collected tax revenue of R1.9 trillion, consolidated expenditure for 2023/24 is R2.2 trillion. At least 24% — or R457bn — towards education and related programmes. Social grants will receive R378.5bn, R259.2bn will be spent on health and another R259.7bn directed to community development projects such as human settlements, electrification programmes and investments in public transport.
The police services, defence, courts, state security and home affairs receive a combined R227.3bn. A further R237.6bn is allocated to efforts aimed at economic development.
The minister warned he might increase taxes if he is forced to budget for an affordable basic income grant.
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