Eskom’s debt stood at R488bn at the end of March, an increase from R440bn at the 2019 year end, pre-audit figures presented to parliament showed on Wednesday.
A draft of a cash-flow statement was presented to the standing committee on appropriations on Wednesday.
The statement showed that Eskom, which announced stage 4 load-shedding on Wednesday after several generation units broke down, would not have had sufficient cash to service its debt over the past financial year had it not been for the government bailout.
At the end of March, Eskom had an operating cash surplus of R36.2bn and debt service costs of R70.6bn. The government bailout for the year was R49bn with the shortfall met by a mix of operating cash and new debt, CFO Calib Cassim said in an interview.
This confirms that Eskom remains in a classic debt trap in which it must borrow to repay debt. The debt service costs included a capital payment of R31.5bn and interest costs of R39.5bn. In 2020/2021, debt costs will be substantially larger with R95bn in interest and capital payments falling due, and the shortfall between those and the appropriated bailout of R56bn will be larger.
The rise in debt service costs, as capital repayments become due, underlines the need for a permanent solution to Eskom’s debt problem. The government has procrastinated excessively in determining a solution. In December 2018, President Cyril Ramaphosa appointed a high-level advisory panel to examine the Eskom problem. It submitted a report by March in 2019 but it was never made public.
In July 2019, public enterprises minister Pravin Gordhan appointed a chief restructuring officer, who was asked to examine the various financial proposals on the table, including one from the advisory panel and another from the Treasury. The report by the chief restructuring officer was also never made public. There has been scant information from the government since then on the way forward for Eskom.
Eskom’s huge expansion of debt over the past 10 years is largely linked to the building of power stations Medupi, Kusile and Ingula. Ingula has been completed while Medupi and Kusile are close to completion.
The expected costs, which have over run significantly, were last estimated in 2016 at R156bn for Medupi and R161bn for Kusile.
These are “overnight” costs and exclude the cost of interest payments. In the case of Medupi, they also exclude the cost of flue-gas desulphurisation, which must be completed as a condition of the $3.75bn World Bank loan to Eskom.
Eskom is expected to present its annual financial statements by the end of September.
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.