Another bailout for cash-strapped Eskom

The National Assembly has once again signed off on bailout for Eskom, however opposition parties believe that money will not save the problem.

The cash-strapped power utility will receive R59-billion over the next two years, in addition to the R17-billion received in April this year and the R23-billion a year for 10 years which was allocated in February’s budget.

Did Eskom use load-shedding to secure more money?

Democratic Alliance (DA) MP, Ashor Sarupen explained that the bill which was signed off allows the minister to transfer the funds to Eskom without any preconditions, which raises the question as to whether the power utility used load-shedding to hold government hostage.

Economic Freedom Fighters (EFFs) Floyd Shivambu said the problem is that Eskom need to stabilise coal prices.

Glencore is currently supplying coal at more than R600 a tonne and the National Energy Regulator of South Africa (NERSA) need to step in and secure a cost of around R350 per tonne, said Shivambu.

Eskom can not borrow more money

Finance minister Tito Mboweni said the bailout will come from the public coffers to assist Eskom.

Sarupen expressed that the bailout is like a blank cheque and rewards corruption while those responsible for the decay of the entity should be held accountable. There needs to be stringent conditions applied to the funds.

The power utility is not able to survive financially due to it’s high level of debt, at half a billion rand, and inability to generate sustainable revenue due to losses of R21-billion and municipal debt outstanding of R25-billlion.

Mboweni says the first step would be to employ competent management and a competent board of directors who must be held accountable for the operation of Eskom.

The bill comes with many conditions

Despite the bill being passed by the National Assembly on Tuesday, it will need to be approved by the National Council of Provinces before being signed into law by president Cyril Ramaphosa.

Mboweni has mentioned that the conditions to Eskom are that the funds may only be used to pay debt and interest payments. A new CEO must be appointed within a month of the bill coming into law and Eskom’s board must be strengthened by the end of the year.

Municipal debt

As at the end of September the municipal debt stood at R25.1-billion.

According to Eskom’s statistics, R2,5-billion is owed by government departments and almost R1-billion from international sales to Mozambique, Zambia and Zimbabwe.

This will affect the countrys fiscus

The bailout will plunge the country into a serious financial crises and put the debt to GDP ratio at an unsustainable level as Eskom is the countries biggest financial risk, but there is little choice but to issue the bailout.

Low risk of load shedding

While there is currently a low risk of load shedding on Wednesday, Eskom have warned that power supply is vulnerable and the grid remains constrained as any unplanned or unexpected breakdowns will result in load shedding.

An appeal to use electricity sparingly by switching off geysers and non-essential lighting and appliances has been sent out by the power utility.