Ramaphosa's big Eskom plan - and the big price tag it comes with
Money to help Eskom is expected via an urgent Special Appropriation Bill to be tabled in Parliament.
JOHANNESBURG – "Eskom is too vital to our economy to be allowed to fail." That was what President Cyril Ramaphosa said about the embattled power utility during his State of the Nation Address on Thursday.
Eskom is set to receive further funding from government through an urgent Special Appropriation Bill that will be tabled in Parliament. The bill is expected "to allocate a significant portion of the R230 billion fiscal support that Eskom will require over the next 10 years in the early years".
The president said this plan was in line with the recommendations of both the Eskom Sustainability Task Team and the Technical Review Team, which were appointed by government to assist the debt laden power producer.
The severity of the problems at Eskom was highlighted by the president.
“The utility’s financial position remains a matter of grave concern,” he said.
In his budget speech in February, Finance Minister Tito Mboweni announced that Eskom would be allocated a R69 billion financial support package over the next three years by National Treasury to help it service its debts. However, Mboweni made sure to clarify that the package wasn’t a bailout from government.
Ramaphosa said this committed funding ensured that Eskom had sufficient cash to meet its obligations until the end of October 2019. He said Mboweni would further elaborate on the details of the Special Appropriation Bill in due course.
“For Eskom to default on its loans will cause a cross-default on its remaining debt and would have a huge impact on the already constrained fiscus,” Ramaphosa said.
Following the resignation of Eskom CEO Phakamani Hadebe last month, Ramaphosa said the appointment of a new CEO would also be announced in due course.
Hadebe is expected to serve his notice until the end of July. He cited health reasons for his sudden resignation, but the president heaped praise on him in his Sona. He also took the opportunity to affirm the board, despite calls from the National Union of Mineworkers to fire the board.
“He [Hadebe] came in at a difficult time at Eskom and has done a great deal with the board led by Mr Jabu Mabuza to stabilise the company,” the president said.
On the progress to unbundle Eskom into three entities – generation, transmission, and distribution – Ramaphosa said government would soon appoint a chief restructuring officer, who would be expected to “reposition Eskom financially with careful attention to the mix between revenue, debt and cost structure of the company”.
DEBT OWED TO ESKOM
Ramaphosa also spoke about the debt owed to Eskom by municipalities and individual users, saying those who use electricity must pay for it.
In one instance, it was estimated that Soweto residents owed Eskom R17 billion in debt, which has contributed to the parastatal’s total debt of more than R400 billion.
“Failure to pay endangers our entire electricity supply, our economy and our efforts to create jobs,’ Ramaphosa said. “The days of boycotting payment are over. This is now the time to build it is the time for all of us to make our own contribution.”