Tito Mboweni: 'Pouring money into Eskom is like pouring water into a sieve'
Government will allocate R23bn a year in the next three years to help the cash-strapped power utility Eskom meet its financial obligations.
This was announced in parliament on Wednesday by finance minister Tito Mboweni when he tabled that national budget for the 2019/2020 financial year.
Mboweni also announced that an independent chief reorganisation officer, a first in government, would also be appointed by himself in consultation with public enterprises minister Pravin Gordhan to oversee the unbundling of Eskom.
The unbundling of the state energy utility into three separation entities (generation, distribution and transmission) operating under Eskom Holdings, was announced by President Cyril Ramaphosa during his state of the nation address a fortnight ago and has put the government on a collision course with labour unions as they fear job losses.
Eskom is currently burdened with a debt of R400bn debt largely accumulated over its capital expansion projects that have been plagued by allegations of mismanagement over a period in which the state-owned company was also marred by serious allegations of corruption.
But Mboweni has stuck to his guns, saying that putting taxpayers' money into Eskom in its current form amounted to throwing money into the ocean.
"Pouring money directly into Eskom in its current form is like pouring water into a sieve," said Mboweni in his maiden budget speech.
"I want to make it clear, the national government is not taking on Eskom's debt. Eskom took on the debt. It must ultimately repay it. We are setting aside R23bn a year to financially support Eskom during its reconfiguration.
"The fiscal support is conditional on an independent chief reorganisation officer (CRO) being jointly appointed by the ministers of finance and public enterprises with the explicit mandate of delivering on the recommendations of the presidential task team. We will make announcements in this regard in the coming weeks.
"Minister Gordhan and the strong team he has built at the department of public enterprises will continue to exercise close and ongoing monitoring of Eskom."
In the budget review document, the National Treasury states that the Eskom board would be "developing a sustainable operation plan" for each of the three proposed entities, which would be considered by government in the next three months.
"The first step in the separation process will be to transfer a portion of Eskom's assets to a new transmission company. In line with the president's statement, the new company will invite the participation of strategic equity partners that will provide capital for the business and strengthen oversight.
"The financial support package, with strict conditions attached, will enable Eskom to restore positive cash flows, and secure the necessary liquidity to undertake urgent maintenance to restore stable electricity supply.
"Further steps in restructuring the electricity will be announced in the months ahead. Government will require Eskom's board to sign a new shareholder compact. Executive remuneration will be tied to performance and streamlining of mid-level management will continue."