In a bid to shore up the finances of ailing power utility Eskom, President Cyril Ramaphosa announced on Thursday the tabling of a special appropriations bill to front load R230-billion in funding earmarked for Eskom in the coming decade.
During his third State of the Nation address (Sona), presented on Thursday, the president said the state would table the Bill on an urgent basis to allocate a significant portion of the R230-billion fiscal support that Eskom will require over the next 10 years, in the early years.
In February, the state announced that it would provide Eskom R23-billion each year, for the coming three years, with the likelihood that this support would be extended into the coming decade — equating to a nominal R230-billion.
Ramaphosa revealed that even with the committed funding from government, outlined in the 2019 budget, Eskom only has sufficient cash to meet its obligations until the end of October 2019.
“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.
Further details will be announced by Finance Minister Tito Mboweni.
The president further committed to the appointment of a new chief executive for the institution — after Phakamani Hadebe announced last month that he would be stepping down — and the appointment of a chief restructuring officer, “to reposition Eskom financially with careful attention to the mix between revenue, debt and cost structure of the company”.
The utility has been labouring under a R440-billion debt burden and major operational challenges led to a series of power cuts early this year. The cuts were a key contributor to the contraction of the economy in the first three months of 2019.
The president has also stressed the need for consumers to pay for electricity. The country’s municipalities owe the parastatal billions in unpaid bills.
“Eskom is working with government and other stakeholders to address its overall debt as well as the debt owed by municipalities and individual users,” he said. “Failure to pay endangers our entire electricity supply, our economy and our efforts to create jobs. The days of boycotting payment are over.”
While Ramaphosa re-emphasised the notion that Eskom was to important to the economy to be allowed to fail, he did not elaborate on plans to unbundle Eskom announced in his earlier Sona in February. At the time he announced the planned splitting of Eskom’s business units into three separate institutions — generation, transmission and distribution — under Eskom Holdings.
This proposal has however met with steadfast resistance by labour, which views the move as one step away from privatisation.