Cape Town - 180917 - Power lines near Du Noon in the Western Cape. Picture: Henk Kruger/ANA/African News Agency
Cape Town - 180917 - Power lines near Du Noon in the Western Cape. Picture: Henk Kruger/ANA/African News Agency

Eskom in uphill battle to recover R69bn

By Siphelele Dludla Time of article published Oct 8, 2020

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JOHANNESBURG - Power utility Eskom yesterday suffered a huge blow on its push for the recovery of misappropriated R69bn equity when the National Energy Regulator of South Africa (Nersa) won leave to appeal its bid for the recovery of the misappropriated R69billion of government equity.

The North Gauteng High Court in Pretoria yesterday ruled in Nersa’s decision on Eskom’s fourth Multi-Year Price Determination (MYPD4), leaving the power utility with an uphill battle to recoup the money.

The blow comes as the SA Reserve Bank (SARB) blamed Eskom for the country’s stagnant economy.

SARB said electricity shortage was one of the most prominent obstacles to a faster economic recovery.

SARB head of economic research Chris Loewald said electricity prices could rise significantly in the medium term, but the outlook was complicated by a range of court challenges affecting past regulatory decisions.

Loewald said the Monetary Policy Committee forecasts indicated further large increases in electricity prices, averaging 8.2 percent for 2021 and 10 percent for 2022.

“Final decisions on these matters are still pending, but initial court judgments have favoured Eskom, and the risks therefore lie in the direction of electricity inflation rates exceeding current assumptions,” Loewald said.

“If all Eskom’s challenges succeed, electricity inflation will likely average 14.1percent in 2021 and 25.9percent in 2022.

"The current electricity assumptions take a middle path through these scenarios.”

In July, the High Court set aside Nersa’s decision on Eskom’s MYPD4 for the 2019/20, 2020/21 and 2021/22 financial years following theNersa’s acknowledgment of procedural unfairness in the MYPD4 decision concerning the inclusion of the R23bn government grant without allowing Eskom to submit its representation.

The judgment required Eskom to recover the R69bn in a phased manner over a three-year period.

Eskom is faced with a mounting debt of R488bn and the utility has embarked on an aggressive campaign to recoup monies owed to it by debtors as its ageing infrastructure fails to handle rising demand, leading to load shedding.

Load shedding restarted in July, despite lower levels of economic activity, and Eskom has warned it will persist throughout 2021, interrupting economic activity and disincentivising new investment.

South Africa’s economy contracted by an annualised 51percent in the second quarter, leading to 2.2 million job losses.

South African Chamber of Commerce and Industry economist Richard Downing said the economy would take time to recover due to a number of setbacks, including unsustainable fiscal position of State-owned companies and load shedding.

“The economy took the pain given rising unemployment, business closures and the GDP decline. This shows that it’s not just about unlocking the economy by easing the lockdown,” Downing said.

“The economy will take some time to recover. There will have to be more done than just unlocking the economy.”

Eskom spokesperson Sikonathi Mantshantsha said: “The money was in Eskom’s balance sheet as revenue, but Nersa injected the R69bn in Eskom’s income statement as revenue.

"Eskom did not get the benefit of the equity injection.

“What they want the appeal court to clarify is when and how that money will be recovered by Eskom through a time period. Whether a tariff increase will happen is not in dispute.”

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