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The budget delivered by Finance Minister Enoch Godongwana on Wednesday has been widely welcomed after addressing the ‘elephant in the room’ that is Eskom’s R423 billion debt, a big part of which was at risk of default. Eskom’s challenges in conducting key maintenance and keeping the lights have a drag on the economy and on new investment, the minister said.
Godongwana said in response to the myriad of challenges faced by the power utility: “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.”
National Treasury provided a staggered R254 billion debt relief arrangement that included settling the utility’s debt in three tranches over the medium term and directly taking on part of the debt.
The deal comes with conditions, including that the company does not borrow any additional funds or grant salary increases, like the 7% it granted to workers last year, which will be detrimental to Eskom’s financial position.
Eskom, which is yet to announce an interim chief executive after Andre de Ruyter left in a messy fashion this week, would have to meet. De Ruyter had been serving his notice until the end of March, but that has been cut short after the Eskom board relieved him of his duties with immediate effect on Wednesday.
The Minerals Council SA (MCSA) welcomed the intervention on Eskom’s debt and the tax rebates meant to encourage businesses to build their renewable energy projects.
The MCSA said:
Labour federation Cosatu called the budget ‘uninspiring and jaded’.
It said:
Of the budget, 60% went towards social transfers highlighting the desperate situation that many South Africans find themselves in, in an economy that has not been able to grow around the 5% growth required to create jobs and less dependence on the state for survival for many households.
Cosatu said: “Despite avoiding the recession and the recovery trend that emerged in the later part of 2022, by the end of the year, the official unemployment rate had remained stagnant (declining by a mere 1%) to 43%.
“The budget does not provide hope of a decisive set of bold interventions that will jolt the economy from a projected growth of 0.9% in 2023, 1.5% in 2024 and 1.8%. It is self-delusional to believe that a timid budget will spur the economy to grow and slash unemployment,” the federation said.
Group strategy economist at Momentum Metropolitan Johann van Tonder said government was back to being a going concern after the SA Revenue Service (Sars) exceeded collection targets.
“The revenue exceeded non-interest expenditure and it was able to provide personal income tax relief to consumers as well as incentives for consumers to purchase solar panels. This is almost R20bn back into the pockets of South Africans – and this is not to mention the transfer duty relief.”
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Meanwhile, the SA Farmers Development Association welcomed the unchanged policy stance on the sugar tax. “This is a relief to the sugar industry and most importantly, to our farmers who have been anxiously waiting on the minister to announce this good news. This would enable the industry to pursue various diversification opportunities, which would allow the industry to export less sugar and ensure the sustainability of the industry,” its statement read.
Godongwana also provided R1 billion to SAA to assist with the business rescue process, and the Post Office currently in dire straits and in the process of retrenching half of its staff was allocated R2.4 billion.
In his speech, Godongwana gave no further detail on the conditions of these allocations, except:
The Takatso consortium, which has a majority share of SAA, said the R1 billion fell short of government’s obligation to conclude the sale of the airline and the business rescue process.
Takatso aviation director Lizeka Matshekga said: “The partial fulfilment of this obligation is not what Takatso Aviation had expected. We will therefore have to assess the impact thereof on the progress of the transaction.
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“The unease Takatso Aviation funders have with signing off on the release of the funds we’re mobilising for our R3 billion commitment to SAA, while the outstanding business rescue process debt subsists is an issue we have highlighted time and again.
“Part of the context for this unease is the well-known fact that this debt burden stems from SAA’s past financial distress. We, therefore, need to assess whether a partial fulfilment of government’s undertaking to clear this debt changes anything in our financing process,” she said.
