Despite speculation that Finance Minister Tito Mboweni would make an announcement on reducing Eskom's R450bn debt burden, the minister said on Wednesday that the power utility's management has yet to show progress on reforms.
The government will only make an announcement on how it will help the struggling power utility reduce its debt burden once it has seen evidence of a commitment by Eskom to become more competitive and cut costs.
Mboweni tabled the Medium-Term Budget Policy Statement on Wednesday, a day after Public Enterprises Minister Pravin Gordhan released a Special Paper on Eskom – a roadmap outlining how the utility's unbundling would proceed, as well as cost-saving measures to address its dire financial situation.
"Once I am convinced that the Eskom board and management has made an irrevocable commitment to implement government’s decisions and there is enough progress, we will negotiate the appropriate size of debt relief. Eskom is a business and should be run that way," said Mboweni.
Proposals for the state to take over a portion of the utility's debt in return for equity have been raised by business leaders and economists in recent months, as Fin24 previously reported. Bloomberg reported in July that state asset manager the Public Investment Corporation, which manages about R2.1trn on behalf of state workers, was considering swapping its Eskom bond holdings for equity.
Treasury director-general Dondo Mogajane however has slammed rumours of a debt-equity swap. He told journalists at a pre-budget briefing earlier on Wednesday that even if government takes on Eskom's R450bn debt, it won't solve the power utility's operational challenges. Treasury is adamant that Eskom must sort out the state of its business before any debt relief can be provided. "Fix the business and we will be standing ready to look at options [of debt relief] available to us," Mogajane said.
Mboweni, meanwhile, said that "very difficult budget adjustments" have been made to support Eskom. "We cannot continue to throw money at Eskom," he said. "For the sizeable support required, it cannot be business as usual."
The minister also announced that in future, any new cash flow support provided to Eskom will be in the form of loans that have to be paid back.
In February Treasury announced Eskom would receive a R23bn bailout ever year over the next three years. This is in addition to a Special Appropriation Bill, which grants it a further R59bn over the next two years. The bill has been agreed to by the National Assembly and is now with the National Council of Provinces for consideration.