South Africa to Announce Eskom-Funding Plan This Month
South Africa to Announce Eskom-Funding Plan This Month
(Bloomberg) -- South Africa’s Treasury will unveil plans later this month to provide more financial support to state-owned power utility Eskom SOC Holdings Ltd.
The proposals for funding this year and next will be announced in a Special Appropriations Bill on July 23, Finance Minister Tito Mboweni told lawmakers Thursday in Cape Town. Additional funding is also being planned for South African Airways, the state broadcaster and arms manufacturer Denel SOC Ltd., he said.
“I must emphasize that this additional government support cannot be a blank check to these state-owned enterprises,” Mboweni said. “We really and truly cannot go on like this.”
Eskom has debt of 440 billion rand and is regarded as the biggest risk to South Africa’s economy. The utility isn’t selling enough electricity to cover its interest payments and operational costs. The government has been scrambling to finalize plans to fix the business and approved a 69 billion-rand, three-year bailout for the debt-laden company in February, which has been viewed as inadequate.
President Cyril Ramaphosa last month said the government would expedite giving Eskom a “significant portion” of 230 billion rand ($16.5 billion) that it needs over the next decade to remain solvent.
Biggest Risk
“Given the high risks to the economy of a systemic failure if Eskom were to collapse, government is urgently working on stabilizing the entity, while developing a broad strategy for the future,” Mboweni said. “Eskom presents the biggest risk to the fiscal framework because of its financial problems and its negative impact on the lives of South Africans.”
A number of key developments and indicators for the turnaround of Eskom are expected over the next few weeks. A chief restructuring officer, who will oversee the breakup of the company into three businesses, is set to be appointed. And an acting replacement for Chief Executive Officer Phakamani Hadebe is expected when he steps down at the end of the month.
Three teams have been assisting and advising Eskom on its turnaround, including members of the National Treasury and a technical group appointed by Public Enterprises Minister Pravin Gordhan.
The company plans to report results for the 12 months through March at the end of July, Eskom Chairman Jabu Mabuza said Thursday. The utility posted a loss of 2.3 billion rand in the year through March 2018.
--With assistance from Paul Burkhardt.
To contact the reporters on this story: Paul Vecchiatto in Cape Town at pvecchiatto@bloomberg.net;Amogelang Mbatha in Johannesburg at ambatha@bloomberg.net
To contact the editors responsible for this story: Benjamin Harvey at bharvey11@bloomberg.net, Paul Richardson
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