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R69 billion set aside over three years to reconfigure Eskom

The cash-strapped power utility will get R69 billion over the next three years but under strict conditions.

Picture: EWN

CAPE TOWN - Finance Minister Tito Mboweni has unveiled plans to help Eskom restructure, deal with its debt and do urgent maintenance to secure the supply of electricity.

The cash-strapped power utility will get R69 billion over the next three years but under strict conditions.

Mboweni’s forecast slower growth and revealed a larger than expected revenue shortfall of more than R15 billion – due to the poor economy and weakened capacity at SARS.

There’ll be no increases in personal or corporate income tax – but fuel levies will increase by about 30 cents a litre and a new carbon tax will kick in.

Presenting his R1.8 trillion Budget Finance Minister Tito Mboweni says the country’s recovery from last year’s recession will be slower than expected - but steady.

“It is expected that real GDP growth in 2019 will rise to 1.5% and then strengthen moderately to 2.1% in 2021.”

Eskom will be receiving R23 billion from the fiscus this year and in each of the next two years. But that will be to restructure the company into three separate entities.

The company has used an additional R50 billion of its R350 billion guarantee this year to raise capital.

Mboweni says this support for Eskom comes with conditions, including the appointment of a chief reconfiguration officer who will oversee the parastatal’s unbundling.

Mboweni’s moved to curb government spending by just over R50 billion over the next three years, about half of this through measures to rein in the government’s soaring wage bill.

However, the budget deficit will be higher over the next few years.

Eskom, responsible for producing 95% of the country’s electricity, is mired in debt and inefficiencies. Recent days of load-shedding have left the economy reeling - and the 96-year-old giant parastatal is now considered a threat to national security, because if it crashes and burns, so does the economy.

Meanwhile, South African Airways (SAA) has been waiting on an announcement from Finance Minister Tito Mboweni on when it will receive the rest of the R21 billion government bailout it requested.

The government paid the airline R5 billion of the sum in 2018.

SAA has also managed to secure a cash injection of R3.5 billion from banks to help it stay afloat until June.

STRUGGLING STATE-OWNED COMPANIES

Mboweni has taken a hard line against struggling state-owned companies.

The Post Office is the only entity which will receive an injection in this year’s budget.

But the government has revised its contingency reserve upwards to R13 billion to respond to requests for financial support.

Delivering his maiden Budget address in the National Assembly on Wednesday afternoon, Mboweni said all financial support to SOEs will have to be as budget neutral as possible.

Guarantees to Denel and SAA have also been increased this year, something Mboweni says needs to stop: “Cabinet is considering a proposal to end the issuing of guarantees for operational purposes. Expiration dates on guarantees will be strictly enforced.”

Mboweni says strategic equity partners need to be found where possible.

Treasury will, however, be allocating R1.5 billion to the Post Office over the next three years.

Mboweni says any financial support to entities including SAA, the South African Broadcasting Corporation and Denel, will have to be raised from the sale of non-core assets.

To read Minister Tito Mboweni’s full Budget speech, click here.

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