South Africa Finance Minister Tito Mboweni delivers the 2019 Budget in Parliament on Wednesday. PHOTO: GCIS
South Africa Finance Minister Tito Mboweni delivers the 2019 Budget in Parliament on Wednesday. PHOTO: GCIS

Minister insists on private sector participation in Eskom reconfiguration

By Kabelo Khumalo Time of article published Feb 21, 2019

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JOHANNESBURG – Finance Minister Tito Mboweni on Wednesday threw down the gauntlet on trade unions, insisting on private sector participation in the planned reconfiguration of Eskom as a major condition for continued government bailouts.

Mbweni said while the government would shore up Eskom’s balance sheet with R69 billion, it would not take on Eskom’s debt as it was the responsibility of the utility to repay it.

“The fiscal support is conditional on an independent chief reorganisation officer being jointly appointed by the ministers of Finance and Public Enterprises (Pravin Gordhan), with the explicit mandate of delivering on the recommendations of the Presidential Task Team. We will make announces in this regard in the coming weeks.”

President Cyril Ramaphosa announced a major policy shift this month unveiling plans to break up the utility into three entities responsible for generation, distribution and transmission housed under Eskom Holdings.

The utility took the largest portion of the government's proposed reprioritised spending of R75.3bn over the medium-term, with the remaining R5bn set aside for the infrastructure fund and R1bn for the 2021 Census.

Treasury said in its Budget review statement that the financial support package would come with strict conditions attached for Eskom to restore positive cash flows and secure the necessary liquidity to undertake urgent maintenance to restore stable electricity supply.

The statement said the unbundling of Eskom was at an advanced stage and that the board was developing a sustainable operational plan for each business. 

It said the government would give consideration to the proposals within 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,” the statement said.

"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 government wants the transmission licence to be amended to allow for the trading of electricity and transferred to the transmission company. 

Mboweni further said that Cabinet was debating a proposal to end the issuing of multibillion-rand guarantees for operational purposes and that government would take a harder stance on enforcing expiration dates on guarantees. 

The Budget Review document painted a bleak picture of fiscal positions of state-owned entities. It said contingent liabilities – mainly guarantees to public entities – were  projected to hit the R879.6bn mark at the end of next month.   

Eskom initially asked the  government to place  R100bn of its debt on governments books.

Eskom board chairperson  Jabu Mabuza yesterday said the government allocation would go a long way in addressing the utility’s balance sheet.

“(The amount of) R23bn is about 65 percent of our debt servicing cost so it does go somewhere.

“It (allows) us  to now go on to the other two pillars in our operational cost containment and indeed on our revenue enhancement, which we can now only pray that the National Energy Regulator of SA, when it does decide on tariffs, it will help us in that direction.”


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