Power Utility Eskom will once again gets a bailout from the government for the next three years, Finance Minister Enoch Godongwana announced during his 2023 budget speech on Wednesday. Godongwana said the government was working tirelessly to come up with plans to end loadshedding. "We are proposing a total debt relief arrangement for Eskom of R254 billion" Godongwana said.
PLANS ON ESKOM
Godongwana said the government was acting decisively to bring additional capacity onto the grid. "We are also working to transform the electricity sector to achieve energy security in the long term. As part of this during the Medium-Term Budget Policy Statement (MTBPS) we announced that the government will take over a portion of Eskom's debt. Firstly, doing so will ease pressure on the company's balance sheet, enabling it to invest in transmission and distribution infrastructure. It will also allow Eskom to conduct the maintenance required to improve the availability of electricity. Secondly, R337 billion of Eskom's debt is already government guaranteed. Explicitly taking on this debt, will reduce fiscal risk and enhance long term fiscal sustainability," he said.
DEBT RELIEF
Godongwana revealed that South Africans experienced loadshedding 207 days in 2022 as compared to 75 days in 2021. As a results, treasury department is proposing a total debt-relief arrangement for Eskom of R 254 billion. "This consists of two components. One is R184 billion. This represents Eskom's full debt settlement requirement in three tranches over the medium term. Second is a direct take-over of up to R70 billions of Eskom's loan portfolio in 2025/26," the Minister said.
NO FURTHER LOANS
"Eskom will not need further borrowing during the relief period. Government will finance the arrangement through the R66 billion baseline provision announced in the 2019 budget, and R118 billion in additional borrowings over the next three years. the arrangement is accompanied by strict conditions toto safeguard public funds. Eskom will have to prioritise capital expenditure in transmission and distribution during the debt-relief period. For the company to focus on maintenance of the existing generation fleet to improve availability of electricity," he said.
MUNICIPAL DEBT
Godongwana also said in his budget speech that there were plans in place to make all municipalities pay back money owed to Eskom. Godongwane said that municipalities in South Africa owed Eskom R56.3 billion and the debt is rising. "Undertaking a debt-relief of this magnitude without addressing this risk would be counterproductive. We are working with Eskom to provide a solution to this problem, wherein Eskom will provide incentivised relief to municipalities whose debt is unaffordable. Recently Eskom announced that South Africa may soon find itself on stage 8 of loadsheddng in winter.