The disbursement of the government’s R254bn debt relief to Eskom will now come with stricter conditions, including that the loans will be interest-bearing rather than interest-free.
In his medium-term budget policy statement (MTBPS) on Wednesday, finance minister Enoch Godongwana said that that would ensure the debt relief better reflected the cost of the Eskom debt-relief arrangement.
The conditions will be tabled through the Eskom Debt Relief Amendment Bill, which will also provide the minister with powers to reduce the amount of debt relief provided to Eskom in the event the entity does not meet the conditions.
“These principles and strict conditionalities, greatly enhanced by the amendment, are a key part of how we will deal with Eskom and all other state-owned entities, to avoid a repeat of the mistakes in previous bailouts,” Godongwana said on Wednesday.
The debt relief for Eskom was announced in February to ensure the entity strengthens its balance sheet, which is burdened with R423bn in debt, and allow it to restructure and undertake the investment and maintenance needed to lessen the load-shedding crippling the economy.
The relief will cover about R168bn in capital repayments and R86bn in interest as they fall due and can be used for this purpose. Eskom will get advances of R78bn in 2023/2024, R66bn in 2024/2025 and R40bn in 2025/2026.
One of the previous conditions attached to the relief bill includes that Eskom concessions all its coal-fired power stations after they have been resuscitated, as recommended by an international consortium.
Eskom's financial statements, which were released Tuesday show that the entity's financial position has deteriorated despite state support.
Due to a record 280 days of load-shedding, Eskom’s energy sales fell 5% while spending on diesel to run open-cycle gas turbines (OCGT) rose 50% for the year to March 31.
These were some of the main factors driving Eskom’s net loss after tax to R24bn, up from R12bn in the previous year.
Despite some of the R254bn in debt relief to Eskom announced by the Treasury in February starting to flow to the utility, its total debt increased from R396bn in the 2022 financial year to R423bn in 2023.
During a pre-budget media briefing on Wednesday, the Treasury’s director-general, Duncun Pieterse, said the new conditions would be an approach that the government would be implementing across all state-owned entities.
“It demonstrates the way in which bailouts of state-owned companies are being approached by the government and is changing in ways more in line with stricter conditionality that is enforced, and that affects how bailouts are disbursed even when they are in the fiscal framework,” he said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.