PARLIAMENT, February 20 – Troubled power utility Eskom will get an additional R69 billion from the state over the next three years to help it service its debt, Finance Minister Tito Mboweni announced in the 2019 national budget on Wednesday.
“We are setting aside R23 billion a year to financially support Eskom during its reconfiguration,” the minister said.
He said the government was not taking over Eskom’s debt, and the cash injections would go hand in hand with the restructuring of the utility into three independent components.
“I want to make it clear – the national government is not taking on Eskom’s debt. Eskom took on the debt. It must ultimately repay it.”
A chief reorganisation officer would be appointed by himself and Public Enterprises Minister Pravin Gordhan to implement the unbundling of the company.
“The support is conditional on an independent chief reorganisation officer (CRO) being jointly appointed by the ministers of finance and public enterprises with the explicit mandate of delivering on the recommendations of the presidential task team. We will make announcements in this regard in the coming weeks.”
Mboweni said the restructuring of the company, which Gordhan termed technically insolvent this month, would make for more competition and transparency as well as a clear and focused funding model.
“Pouring money directly into Eskom in its current form is like pouring money into a sieve,” Mboweni stressed.
The company has R350 billion in government guaranteed debt and a default would drive the economy into deep crisis, making its financial fortunes a hair-trigger for international ratings agencies.
Mboweni gave further lifelines to Denel and South African Airways but signalled that the government was setting tighter conditions overall for debt guarantees, and was mulling phasing these out altogether.
Chief among the conditions was the appointment of a reorganisation officer, such as would be named at Eskom in coming weeks, to review the running of the parastatal.
“We must tighten the guarantee rules. If a state-owned enterprise applies for a government guarantee for operational purposes, it will be required to appoint a CRO in concurrence with the National Treasury and its bondholders.
“The CRO will undertake a full operational and financial review.”
Mboweni said expiry dates on guarantees would be strictly enforced and ultimately the focus would shift to finding private equity partners for SOEs.
The budget grants state-owned arms manufacturer Denel a further guarantee of R1 billion and loss-making national carrier SAA another R6.2 billion.
SAA CEO Vuyani Jarana confirmed this week that the airline was being split into three different business units for international, regional and domestic operations.
Mboweni jested that state-owned companies were characterised by the famous quote from Charles Dickens’s Oliver Twist: “Please Sir, may I have some more?”
He said the time had come for the country to ask if it still needed the companies who had come to ask for financing simply to continue operating.
“If we do, can we manage them better? If we don’t, what do we do?”