Government is still seized with figuring out how its takeover of Eskom’s debt should look after much speculation about details of the debt relief that is expected to be provided to the ailing power utility.
Delivering his medium-term budget policy statement on Wednesday, Finance Minister Enoch Godongwana said he would like to be more specific about the amounts involved, but said this was not an easy task as it includes negotiating with Eskom’s bondholders as well the National Energy Regulator of SA’s determination of next year’s electricity tariff increases, which will be announced in December.
Government’s improved finances have given it room to intervene and reduce part of Eskom’s mountainous R400 billion debt to make it more sustainable and place it in a position to carry out critical maintenance and planned capital investment.
Details of the rescue plan will now be announced when the country’s main budget is announced in February 2023.
“While the selection of the relevant debt instruments and the method of effecting the relief is still to be determined, the quantum is expected to be between one-third and two-thirds of Eskom’s current debt. The debt takeover, once finalised, together with other reforms, will ensure that Eskom is financially sustainable. The programme will allow Eskom to focus on plant performance and capital investment, and ensure that it no longer relies on government bailouts.”
He pointed out that the debt relief envisaged would include strict conditions.
Meanwhile, other state-owned enterprises (SOEs) that will receive government bailouts include the Land Bank, whose balance sheet remains in the red. It is said to be in the process to find a solution to its financial difficulties, while National Treasury has set aside a possible R5 billion injection, only the bank hasn’t met the conditions set for the funds to be released.
Arms manufacturer Denel has been allocated R204.7 million “to reduce contingent liabilities arising from its weak financial position”.
Denel will receive a further R3.4 billion if it meets the set conditions to conclude its turnaround plan.
Finally, Transnet will receive a capital injection of R5.8 billion, half of which will go towards repairing infrastructure damaged by the KwaZulu-Natal floods of April this year, and the other half towards repairing and maintaining freight rail locomotives.
Capital investment by SOEs has declined over the years, as most of these companies continue to delay and underspend on infrastructure projects, thereby frustrating economic growth efforts. Infrastructure spending was cut by half from a little more than R82 billion in 2016/17 to R44 billion in 2020/21.