Government to take on Eskom’s debt of R254 billion

Government will take over Eskom’s debt of R254 billion to restore the struggling power utility’s financial viability.

Budget speech 2023

This was announced by Finance Minister Enoch Godongwana on Wednesday during his 2023 budget speech in the National Assembly, at Cape Town City Hall.

“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 billion of Eskom’s loan portfolio in 2025/26,” said Godongwana.

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He said the structure of the debt relief meant that 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.”

Eskom’s balance sheet

The minister said government was taking on Eskom’s debt to ease pressure on the parastatal’s balance sheet and to enable it to invest in transmission and distribution infrastructure.

“It will also allow Eskom to conduct the maintenance required to improve the availability of electricity,” he said.

The minister said R337 billion of Eskom’s debt was already government-guaranteed, and therefore, government’s debt relief will reduce fiscal risk and enhance long-term sustainability.

South Africa’s crippling energy crisis was declared a national state of disaster earlier this month by President Cyril Ramaphosa during the State of the Nation Address, with the governing ANC hoping to end the power cuts by December this year.

Stage 6 rolling blackouts have been implemented by Eskom since Sunday as it battles to keep the lights on due to breakdowns at its power stations.

‘Biggest economic constraint’

Godongwana said the lack of reliable electricity supply is the biggest economic constraint.

He underscored the record levels of load shedding the country experienced in 2022 of 207 days of load shedding, compared to 75 days in 2021.

“In response, we are 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,” said Godongwana.

Conditions of debt relief:

• Requiring Eskom 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.
• That the debt relief be used to settle debt and interest payments only.
• And that Eskom implement the recommendations emanating from an independent assessment of its operations, which has been commissioned by the National Treasury.

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