Finance Minister Enoch Godongwana noted that South Africa’s position on Israel’s occupation of Palestine has always been clear. (Dwayne Senior/Bloomberg via Getty Images)
I don’t know how many budget speeches I’ve gone into waiting for a final solution to Eskom’s multi-billion rand debt issue and come out confused or worse, disappointed. Without a capital injection, its debt was all but guaranteed the minute the ailing parastatal was told to go about building Kusile and Medupi power stations off their balance sheet all those years ago.
What we knew then when the construction of those coal-fired stations began, was that Eskom couldn’t do it alone — especially if the National Energy Regulator of SA wouldn’t be amenable to a rapid and steep increase in tariffs to bolster revenue. Well, the tariffs weren’t forthcoming because of political pressures, which left Eskom with a ballooning and unsustainable debt position it is in today.
In such a position, were Eskom a listed company, we’d expect a rights issue in order to raise capital to clear its debt obligations. (Rather simplistic and very simplistic: a rights issue is basically when a company that has say 100 shares valued at R20, releases a further 10 shares for its existing shareholders to buy at R15, thereby raising an additional R150 for the company to settle debt or buy new equipment.)
But alas Eskom isn’t listed and has just the state as its sole shareholder. What that means to me, anyway, is that the state through its treasury needs to come up with a plan for its debt burden. Simplistic, I know, especially given just how badly Eskom has managed its expansion projects since 2008. Still, there’s nowhere else management of the company can ultimately go to for assistance.
Because of the hardballing of the state, and in particular the treasury, Eskom has hobbled under the weight of its debt burden, clearly affecting its ability to maintain its suite of coal-fired stations that average about 41 years in age. Stage six load-shedding, that we are seeing once again, has much to do with the company’s ability to service its operations — they are dying right before our eyes.
But seeing as the finance ministry has always been heralded as the blue-eyed boys among the many ministries we have, their indecision on Eskom and its debt has gone largely unquestioned. But at what cost? Right now, it’s about 12 hours of load-shedding that is squeezing the economy and putting pressure on the fiscus through lower tax receipts.
On Wednesday, Finance Minister Enoch Godongwana, will deliver his second budget speech — wherein I expect him to follow a rather similar course that his predecessors have set, by kicking the can down the road, yet again. The comments on Eskom debt will amount to nothing more than talks about possible solutions going on. I’m certain of it, but would love egg on my face.