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Mboweni: Eskom's financial crisis exposes entire economy to risk

The Special Appropriations Bill in Parliament, which provided for Eskom to get R59 billion of the R230 billion the government has pledged in support over the next decade.

Finance Minister Tito Mboweni addressing the media prior to his annual Budget speech taking place on 20 February 2018 in Cape Town. Pictures: Cindy Archillies/EWN

CAPE TOWN - Finance Minister Tito Mboweni said Eskom posed the biggest risk to the government’s financial fiscal framework because of its financial difficulties and their negative impact on the lives of ordinary South Africans.

Mboweni said because of the risks to the economy if Eskom were to collapse, the government was urgently working to stabilise the power utility while drawing up a broad strategy for its future.

He was introducing the Special Appropriations Bill in Parliament, which provided for Eskom to get R59 billion of the R230 billion the government has pledged in support over the next decade.

The Bill allowed Eskom R26 billion this financial year and R33 billion next year. The Bill would now go before Parliament’s Standing Committee on Appropriations.

Mboweni did not mince his words: “As it stands, Eskom is not financially sustainable based on its current high levels of debt and its inability to generate sufficient revenue to meet its operational and capital obligations which exposes the entity to higher levels of liquidity and balance-sheet risks.”

He said Eskom’s financial and operational problems were caused to a large extent by the governance issues now playing out at the Zondo inquiry into state capture.

“Without major changes to Eskom’s business model and financial assistance provided by government, the company will be unable to meet its financial obligations through the 2019/2020 financial year. At a strategic level, we must thus face the reality that a large vertically integrated energy company is an outdated model in a changing industry both domestically and internationally."

Mboweni said he has been in talks with Public Enterprises Minister Pravin Gordhan and expected to be able to announce a chief restructuring officer for Eskom later on Tuesday.

A somber Mboweni warned the money for Eskom would come at significant cost to the fiscus and taxpayers alike, especially as preliminary indications show tax revenue would be less than budgeted for in February.

“This could substantially increase the government borrowing requirement for 2019/2020, which will require government to revise its funding strategy and current weekly bond issuance levels before the MTBPS in October,” Mboweni said.

“What I am trying to indicate here, colleagues is that we’re facing a very serious financial situation,” he added.

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