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Talk of "trade-offs" in providing for SA's most vulnerable citizens means less support for those who desperately need it and more support for the financially and operationally unsalvageable state-owned enterprises, including a failed Eskom, says Dion George.
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In his MTBPS, Finance Minister, Enoch Godongwana, announced that somewhere between an eye watering R126 billion and R260 billion of Eskom’s on-balance sheet debt will be transferred from the entity’s balance sheet onto the national balance sheet.
Government argues that Eskom must be rescued, or else our lights will go out, permanently. This is how the already hard-pressed South African taxpayer is pushed into funding another one of spectacular failure.
Eskom, once a world class energy utility, is now a rickety remnant of its former self as it battles to deliver even the bare minimum. Government argues that transferring the entity’s debt will free up space for Eskom to acquire more debt and that the transferred debt will be serviced at a cheaper rate of interest. What the government doesn’t say is that the "debt swap" will introduce even more moral hazard into the failed Eskom model: Eskom has no incentive to become more efficient if it can rely on the government to take over its debt. With the "debt swap" Treasury has effectively extended this sentiment to every other indebted state-owned enterprise.
Investors may tell you Eskom debt has its advantages: high yields, and it's virtually government guaranteed. The reality is, however, that the debt is not guaranteed and there is, in fact, significant investment risk involved on all sides of the equation. The demonopolisation of South Africa’s energy sector must be accelerated and the SOE bailout model must be abandoned if we are to avoid the fiscal cliff that we already find ourselves edging on – a second Eskom will drive the economy over the edge.
While the government has reluctantly introduced measures to entice more private sector participation, significant policy reform is required to inject the much-needed private sector expertise throughout the energy value chain to make it more efficient. Restructuring the energy industry in this manner will catalyse more competitive privately generated electricity, which will reduce electricity prices.
The National Treasury is likely to transfer upwards of R200 billion of Eskom’s on-balance sheet debt onto the national balance sheet and this will increase the national debt-to-GDP ratio, despite a commitment to reduce it, notwithstanding the terrible precedent the move sets for bailing out other indebted SOE’s. More debt means more interest and less money to pay for desperately needed service delivery - especially to the poorest South Africans.
The Minister talks about "trade-offs" in providing for our most vulnerable citizens. By that he means less support for those who desperately need it and more support for the financially and operationally unsalvageable state-owned enterprises, including a failed Eskom that has been run into the ground by the criminal cabal of ANC patronage networks.
Any increase in VAT to pay for government mismanagement should not be supported; instead there should be an expansion of the zero-VAT rated basket of food to include: bone-in-chicken; beef; tinned beans; wheat flour; margarine; baby food; peanut butter; tea and coffee. This is easily affordable and pales into insignificance in comparison to the R30 billion bailout to Denel, Sanral and Transnet and the interest and capital repayments on another likely R200 billion from Eskom.
In his MTBPS speech, the Minister was conspicuously silent on the cost-of-living crisis and the daily battle of more and more households to put enough food on the table. His message to struggling South Africans is that he simply doesn’t care and is far out of touch with reality.
Dr Dion George is the Democratic Alliance spokesperson on Finance. News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.
