A draft budget presentation by the Treasury has proposed a change in the implementation of the final phase of Eskom’s R254bn debt-relief programme into two tranches amounting to R50bn over the next four years, reflecting the improvement in the power utility’s financial position in recent years.
Finance minister Enoch Godongwana was due to make the announcement in the 2025/26 budget in parliament on Wednesday afternoon.
The budget has now been postponed to March 12 after a political deadlock within the GNU coalition partners, who clashed over a proposed increase in VAT.
Instead of the R70bn debt takeover, which was set to be advanced to Eskom in 2025/26, the Treasury says it will now advance R40bn in 2025/26 to redeem debt maturing in April 2026, and R10bn in 2028/29 for debt maturing in May 2028.
“Over the five-year period, government will have provided Eskom with loans to the value of R230bn to assist the utility in repaying its debt. This is about R24bn less than projected at the outset, reducing the gross borrowing requirement.
“In accordance with the original agreement, the debt relief provided to Eskom will be converted into government equity over time,” the budget documents read.
Due to the debt takeover, the government’s gross borrowing requirement is expected to be R14.6bn lower than projected in the 2024.
“To ensure that we maintain the positive momentum towards fiscal sustainability, the debt stabilising primary surplus will continue to anchor fiscal policy over the medium term,” the draft of Godongwana’s speech reads.
The debt relief for Eskom was announced in 2023 to ensure the entity strengthened its balance sheet, which at the time of the relief programme was 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.
One of the previous conditions attached to the relief bill included that Eskom concessions all its coal-fired power stations after they have been resuscitated, as recommended by an international consortium.
Despite the improvement in its financial position, the power utility continues to support struggling municipalities while implementing the debt relief programme. Eskom has previously flagged the R100bn municipal debt as a risk to its sustainability.
Municipal arrears have more than doubled since 2021, increasing from R35bn in 2021 to R45bn in 2022, and to R56bn in 2023 before jumping to R75bn during the first 11 months of the 2023/24 financial year.
About 60% of the roughly R75bn debt is owed by just 10 municipalities, eight of which have been approved to participate in the Treasury’s debt relief programme.
Municipal debt to Eskom rose from R74.4bn at end‐March 2024 to R94.8bn at end‐December 2024.
Many of the 71 municipalities in Eskom’s debt relief programme have been struggling to meet the conditions to have their Eskom debt written off. Key challenges included not paying monthly electricity bills and failing to collect enough revenue (at least 85%) and poor financial management, the Treasury said.
As a result, 47 municipalities were at risk of being removed from the programme, despite receiving monthly support.
Termination from the programme would require municipalities to repay their debt and accumulated arrears in full while facing credit control measures from Eskom, such as legal proceedings and the introduction of prepaid bulk electricity systems.
“Since the medium-term budget policy statement in October, where compliance with debt conditions by municipalities had risen to 76%, 11 more municipalities have now had one-third of their debt written off after meeting the conditions of the programme. Three additional municipalities are due for relief,” Godongwana was due to say.
“To municipalities still struggling, our message is clear: implement cost-reflective tariffs, target free basic services to those truly in need of them, [and] embrace smart technology such as smart prepaid meters to improve revenue collection.”
Meanwhile, the Treasury has made no new allocations to state owned-entities, sticking to Godongwana’s “tough love” stance on SOEs, which continue to drag growth.
Treasury has withheld a widely expected bailout to state-owned logistics company Transnet and instead shifted its focus to provide “direct support to critical infrastructure projects, such as the expansion of the land‐side container terminal in Cape Town, while avoiding debt relief or general balance sheet support”.
Government provided a R47bn guarantee in December 2023, which Transnet used to refinance maturing debt and take on new debt.
“The priority is implementing the freight logistics road map. This includes getting private sector participation and giving nondiscriminatory, third-party access as per the network statement in freight-rail,” Godongwana said.
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