Eskom gets urgent bailout for survival
President Cyril Ramaphosa said Eskom’s financial position continues to be a matter of great concern and that urgent financial support was needed to keep the utility afloat.
“With the current committed funding from the government which was outlined in the 2019 budget, Eskom has sufficient cash to meet its obligations until the end of October 2019.
“For Eskom to default on its loans will cause a cross-default on its remaining debt and will have a huge impact on the already constrained fiscus,” Ramaphosa said.
“We will therefore table a Special Appropriation Bill on an urgent basis to allocate a significant portion of the R230 billion fiscal support that Eskom will require over the next 10 years in the early years.”
The President said Finance Minister Tito Mboweni will outline further details soon.
Mboweni in February allocated R23bn a year for the next 10 years in financial assistance to the cash strapped power utility.
However, outgoing Eskom chief executive Phakamani Hadebe in April said that the entity received more than R200bn less than it had initially asked for in tariff increases and government support, and was in discussions with the government to provide it with further support.
The energy regulator Nersa said in March that it would allow Eskom electricity tariff hikes of 9.41percent for the first year, 8.1percent for the second year, and 5.22percent for the third year.
Eskom initially requested a rate hike of more than 45percent over the next three years, citing financial problems, including debt of more than R400bn.
Eskom’s total carrying value of the unaudited debt of the company at the end of March 2019 was R440bn, of which R273bn nominal value is government guaranteed.
The power producer has about 47000 workers, a figure the World Bank has said is 66percent on the high side.
Moody’s Investors Service this year decided to include the state-owned power utility’s colossal debt load in the country’s overall fiscal-strength calculations.
Moody’s is the only one of the major rating agencies that still have the country’s sovereign debt above junk. The agency is expected to release its next review in November.
Ramaphosa also moved to allay fears that the mandate of the Reserve Bank will be expanded.
The rand breached the R15 mark against the dollar early this month, after the ruling party’s secretary-general Ace Magashule said the party had directed all its deployees to ensure they expand the mandate of the South African Reserve Bank beyond price stability to include growth and employment.
“Our Constitution mandates the South African Reserve Bank to protect the value of our currency in the interest of balanced and sustainable growth. Today we reaffirm this constitutional mandate, which the Reserve Bank must pursue independently, without fear, favour or prejudice,” Ramaphosa said.
Last night’s state of the nation took place just weeks after Statistics South Africa said the economy contracted by 3.2percent in the first quarter - the most in a decade with unemployment at 27.6percent.
Ramaphosa said the private sector has committed to invest R840bn in 43 projects over 19 sectors and creating 155 000 jobs in the next five years.