Finance Minister Tito Mboweni yesterday warned a R59 billion Eskom conditional bailout through his Special Appropriation Bill would come at a “significant” cost to the fiscus – and taxpayers.
“In addition to the financial support to Eskom, there is also a preliminary indication that tax revenue could be significantly lower than budgeted for in the 2019 budget,” Mboweni warned parliament.
“This could substantially increase the government borrowing requirement for 2019-20, which will require government to revise its funding strategy and current weekly bond issuance levels before the medium-term budget policy statement in October.”
The first tranche of R26 billion is for the 2019-2020 financial year, while the second amount would be paid out in 2020-2021 and comes in addition to the R23 billion for the next three years already promised to Eskom by Mboweni in February’s budget, making it a R128 billion bailout over the next three years.
Part of a government task team to put Eskom back on track, energy expert Professor Anton Eberhard was not impressed.
“It makes me sick to my stomach. To quote my Cambridge colleague, Professor David Newberry, Eskom should be a cash cow, not a hungry dog,” Eberhard said on Twitter. “We fought hard around a VAT increase from 14% to 15%, R23 billion at the time. Now it’s gone, whoosh, on the R59 billion for Eskom. We, the people, are paying. Time to get serious around restructuring and a new business model.”
The bailout would give Eskom a little breathing space as it was equity and not a loan, energy expert Chris Yelland noted.
“The cash bailout helps the liquidity crisis at Eskom for a while, but does not address the underlying issues. This is not the first Eskom bailout and it will not be the last, until the underlying structural inefficiencies and problems are addressed,” said Yelland.
“In the 2018-19 financial year, Eskom will have a net loss of more than R20 billion and will only meet about half of its debt service costs [capital repayment plus interest] from its net operating revenue [revenue minus operating costs].
“Eskom is burning cash, and there is no clear plan on how to deal with this. Eskom needs to increase revenue or reduce operating costs, or both,” Yelland said.
Operating costs comprise primary energy costs, staff remuneration, and maintenance.
“Eskom is not financially sustainable based on its high levels of debt and its inability to generate sufficient revenue,” said Mboweni.