Cape Town – The South African government is set to take over Eskom’s debt of R254 billion over the next three years in a move to try and restore the struggling power utility’s financial viability.
This was announced by Finance Minister Enoch Godongwana on Wednesday during his 2023 budget speech in the National Assembly, at Cape Town City Hall.
The annual budget speech was highly anticipated, as South Africans wondered how the government would respond to the troubling state of Eskom and the country’s energy crisis.
Godongwana proposed a total debt-relief arrangement of R 254 billion for Eskom, consisting of two components: one is R184 billion and represents Eskom’s full debt settlement requirement in three tranches over the medium term. Second, is a direct take-over of up to R70 billion of Eskom’s loan portfolio in 2025/26.
South Africa’s Finance Minister Enoch Godongwana announced at the 2023 Budget Speech that government will provide debt relief for the state-owned power utility Eskom amounting to R254-billion ($13.9-billion) over the next three years. pic.twitter.com/VhaYbocTlI
— Ofentse Donald Davhie (@donalddavhie) February 22, 2023
“Because of the structure of the debt relief, Eskom will not need further borrowing during the relief period,” Godongwana said.
“Government will finance the arrangement through the R66 billion baseline provision announced in the 2019 Budget, and R118 billion in additional borrowings over the next three years.”
Conditions
The “strict” conditions of the arrangement “to safeguard public funds” include:
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- Requiring Eskom to prioritise capital expenditure in transmission and distribution during the debt-relief period.
- For the company to focus on maintenance of the existing generation fleet to improve availability of electricity.
- That the debt relief be used to settle debt and interest payments only.
- And that Eskom implement the recommendations emanating from an independent assessment of its operations, which has been commissioned by the National Treasury.
Eskom was one of the more highly anticipated topics of the speech, and Godongwana acknowledged the large amount of load shedding South Africans have been burdened with.
“The lack of reliable electricity supply is the biggest economic constraint. Record levels of load shedding were experienced in 2022 – 207 days of load shedding compared to 75 days in 2021,” the minister said.
“In response, we are acting decisively to bring additional capacity onto the grid. We are also working to transform the electricity sector to achieve energy security in the long term.
“As part of this, during the MTBPS we announced that the government will take over a portion of Eskom’s debt. We are doing this for two reasons:
“Firstly, doing so will ease pressure on the company’s balance sheet, enabling it to invest in transmission and distribution infrastructure. It will also allow Eskom to conduct the maintenance required to improve the availability of electricity.
“Secondly, R337 billion of Eskom’s debt is already government guaranteed. Explicitly taking on this debt, will reduce fiscal risk and enhance long-term fiscal sustainability.
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Picture: Twitter/ @donalddavhie
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Compiled by Junaid Benjamin
