Supplementary Budget 2020

Treasury says Eskom must recover Soweto, municipal debt in return for R59bn bailout

National Treasury is set to impose 28 conditions on Eskom in return for a R59bn lifeline to keep the cash-strapped power utility afloat and enable it to pay interest on its mounting debt burden. 

Treasury updated Parliament's appropriations oversight committee on the conditions attached to an appropriations bill on Wednesday. The bill, which has not yet been passed by Parliament, grants R59bn to Eskom over two years. This is in addition to R69bn over three years announced by Finance Minister Tito Mboweni in his maiden February budget.

In addition to regular and detailed reports of all its finances, Treasury has stipulated the utility needs to recover all debt owed to it by errant municipalities, national department and corporations, including Soweto.

"Eskom cannot provide electricity and not collect debt," Treasury’s acting director-general of the assets and Liabilities Tshepiso Moahloli told MPs. "Members, we know that between Soweto and municipalities – those two alone owe R40bn – it is important that Eskom provides us with actions and plans to recover that money. "

The non-payment of debt to Eskom has been flagged by president Cyril Ramaphosa, Mboweni and Eskom leadership, especially as the utility has been forced to borrow money just to pay the interest on the debt it owes. In his February Budget, Mboweni described the collection of revenue due to the state is a "underlying foundation of our democracy, of building a nation".

The power utility will also have to provide detailed plans for the projected cost and completion dates for for coal-fired power stations Medupi and Kusile, which are billions of rands over budget and years behind schedule. This, according Moahloli, would include cost estimates of a scenario where work stopped.  

Other key conditions inclde

  • Daily reports on cash reserves;
  • Monthly management reports and accounts for generation, transmission and distribution;
  • An action plan to reduce coal, diesel and IPP costs;
  • A plan to hold suppliers accountable and recover money for defects at Kusile, Medupi and other power plants;
  • Board measures to deal with fruitless and waisteful expedite ;
  • No incentive bonuses while bailout conditions are in place.

Moahloli said that, if Treasury believed the information it was receiving was not sufficient or "robust enough" it could at any point appoint advisors review the reports. These costs would be borne by Eskom.     

The committee also heard from Eskom's legal team about how to ensure the conditions are enforced. The 28 conditions can either be included directly in the bill, included in regulations explaining the bill, or could be imposed by the minister of public enterprises.

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