Finance Minister Tito Mboweni on Tuesday presented his plans to parliament to provide financial support to struggling energy utility Eskom.
Mboweni introduced the Special Appropriation Bill in the National Assembly, which will offer the parastatal a lifeline in the current and next financial year.
This will lead to a R59 billion bailout from government in two instalments: R26bn in the 2019/20 financial year followed by R33bn in the 2020/21 financial year.
“I stated in my budget vote 7 for the National Treasury that Eskom presents the biggest risk to the fiscal framework because of its financial problems and negative impact on the economy,” Mboweni said.
“Given the high risks of a systemic failure if Eskom were to collapse, government is urgently working on stabilising the utility, while developing a broad strategy for its future.
“Eskom faces serious financial and operational challenges, which to a large extent were caused by the governance challenges that the entity previously experienced which resulted in a decline in investor confidence.
The minister also said the debt and restructuring of Eskom would need to be addressed.
Mboweni said a team of officials had considered a number of options as a solution to the company’s debt challenges in order to ensure its sustainability.
He will be appointing a chief restructuring officer, who “will be mandated to test these options with the ratings agencies to establish what impact each will have on the fiscus and recommend the appropriate one for implementation”.
(Compiled by Daniel Friedman)