More money for cash-strapped Eskom but with strict conditions, says Mboweni

Finance Minister Tito Mboweni on Tuesday tabled a special appropriation bill for Eskom, which will see the debt-ridden power utility benefit with an additional allocation of R59bn in funding.

The bill provides for an additional amount of money to be made available to the department of public enterprises (DPE) to assist Eskom in meeting its financial obligations. The bill allows for R59bn to be appropriated from the National Revenue Fund to the DPE – R26bn of which is allocated for the current financial year (2019/2020) and R33bn is allocated for the following financial year (2020/2021).

The bill specifically states that the money must be allocated to Eskom to "assist with its financial obligations".

Mboweni told the National Assembly that the announcement of a Chief Restructuring Officer (CRO) at the power utility is imminent. Depending on the finalisation on consultations with Public Enterprises Minister Pravin Gordhan, the CRO could be announced later on Tuesday.

Mboweni explained that Eskom is financially unsustainable and poses the "biggest risk" to the financial fiscal framework because of its financial difficulties and its negative impact on lives.

"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."

The additional funding will have implications for the public purse, Mboweni warned. "We should be reminded that fiscal support announced today will come at a significant cost to the fiscus and SA taxpayers," Mboweni warned.

Stringent rules

This is not a simple bailout as it comes with conditions imposed by the finance minister, before and after the monies are transferred, according to the bill. If the conditions are not met, the minister can stop the use of the monies.

National Treasury will then have to disclose the stoppage to the Standing Committee on Finance and the Select Committee on Finance. Any amounts not used by Eskom are to be transferred back to the National Revenue Fund.

Eskom's debt is approaching R500bn. In April this year, Mboweni invoked section 16 of the Public Finance Management Act, which allowed him to authorise R17.65bn to Eskom to help it meet its debt obligations. The R17.65bn is part of the R23bn allocated to Eskom in the national budget earlier this year.

The bill will next be referred to the Standing Committee on Appropriations for consideration. Once the bill is passed by the National Assembly it will be referred to the National Council of Provinces for consideration.