Budget 2022 | 'Action first': Eskom must sell coal assets before getting more money from govt

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  • Eskom must increase efficiencies and sell coal assets, says Finance Minister Enoch Godongwana. 
  • Government recognises that Eskom has distressed debt.
  • A debt solution will only be announced next year.

Finance Minister Enoch Godongwana says that while Treasury will ultimately have to take over a portion of Eskom’s debt, he wants to see the company increase efficiencies and sell assets – including coal power stations – before it does. 

While Eskom is in the process of selling some of its non-core business and some of its property portfolio, the sale of coal power stations has not been under consideration. 

Addressing MPs, Godongwana said government was aware that Eskom’s debt situation was a concern for Eskom creditors and investors. Eskom debt – which stands at about R400 billion – has been named by rating agencies as the biggest threat to SA’s economy. 

The company has been dependent on government for the past three years to service its debt.

"We acknowledge, however, that Eskom is faced with a large amount of debt that remains a challenge to service without assistance. The National Treasury is working on a sustainable solution to deal with Eskom’s debt in a manner that is equitable and fair to all stakeholders. Any solution will be contingent on continued progress to reform South Africa’s electricity sector and Eskom’s own progress on its turnaround plan and its restructuring. 

"We expect Eskom to take further steps towards cost containment, conclude the sale of assets and implement operational improvements to enhance the reliability of electricity supply," he said.

Coal turkey

Asked by Fin24 whether this included the sale of coal assets, Godongwana said it did. 

Government has been working on a "debt solution" for Eskom for the past four years. While several proposals have been made both by the Treasury and an expert task team appointed by President Cyril Ramaphosa, none has been made public and government has so far failed to make a decision. 

Godongwana said the work "which is legally and technically complex, will be announced within the next financial year."

In the interim, government would continue to support Eskom to remain financially sustainable during its transition, he said. 

To date, Eskom has been provided with R136 billion to pay off its debt with a further R88 billion over the period until 2025/26.

Briefing journalists before his speech, Godongwana said: "Clearly there is a distressed component of Eskom debt. Some fiscal intervention will be necessary, but let’s see some action from Eskom’s side. Let’s have a conversation about how we get to a debt solution."

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