Power utility Eskom has been singled out as as a source of particular concern for government, given the company's pivotal role in the economy and the fact that it has government guaranteed loans of some R250 billion. PHOTO: eskom.co.za

PARLIAMENT - A team of experts from National Treasury will work with the department of public enterprises to correct governance and financial management problems at Eskom, Finance Minister Malusi Gigaba said in his medium-term budget policy statement on Wednesday.

He singled out the power utility as a source of particular concern for government, given the company's pivotal role in the economy and the fact that it had government guaranteed loans of some R250 billion.

"The failures of governance, leadership and financial management (at) Eskom are of grave concern. As government is guarantor over a significant portion of Eskom's debt, it has become a significant risk to the entire economy," he warned.

In a media briefing shortly before delivering the MTBPS in the National Assembly, Gigaba bluntly warned that government could not bail Eskom out if it were to default on its debt obligations.

"I doubt we would be able to step in and bail out Eskom if anything went wrong."

He said government would take three steps to stabilise the running of the company.

These were appointing a new board before the end of November, putting a credible executive management team in place and making sure that the company complied with the Public Finance Management Act.

But he warned that in terms of stabilising the finances of the power utility, it relied on a range of options that could all have significant fiscal implications.

Granting Eskom big electricity tariff increases risked slowing down economic activity, which would mean lower tax revenue. It would also hinder government's efforts to reduce the deficit.

"However, if Eskom does not secure sufficiently high tariff increases its financial position may weaken, requiring it to seek government assistance."

Gigaba reiterated his stance that at present the country could not afford a nuclear procurement drive, nor did it need one.

However, he said he was sure that it remained in the future plans of the department of energy.

- African News Agency (ANA)