South Africa’s Power Company ‘Is Not on the Brink of Financial Collapse,’ Minister Says

(Bloomberg) -- South Africa’s state-owned power utility “isn’t on the brink of financial collapse” and the government has the problem “well under control,” Public Enterprises Minister Pravin Gordhan said.

His comments come after documents last week showed the state was forced to pay 5 billion rand ($353 million) in emergency funds so that Eskom Holdings SOC Ltd. -- which is battling with declining revenue, higher costs, and keeping the lights on -- could meet obligations.

“We have had an extreme financial difficulty as a result of state capture -- the damage that has been caused has been huge,” Gordhan said on Johannesburg-based Talk Radio 702. He was referring to the process in which billions of rand have been looted from government coffers through the use of political connections to secure appointments of allies to key state posts and win contracts. “We understand what changes need to be made.”

The government announced a record 69 billion rand bailout for Eskom in February to be paid over three years. Of that, 23 billion rand is pledged for the current financial year. Based on the 2 percent limit of the appropriated national budget, only 17.7 billion rand can be transferred. The remaining balance will have to be subjected to the normal appropriation process when parliament is constituted after the May 8 election.

The 23 billion rand payout required a special bill that hadn’t been presented to parliament before lawmakers finished business ahead of next month’s vote. The National Treasury had aimed to make the payment between August and October.

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