Wed. Nov 20th, 2019

Eskom bailout set to be funded by tax hikes – report

eskom bailoutPresident Cyril Ramaphosa recently announced that R230 billion will be allocated towards Eskom, with a Special Appropriation Bill set to be tabled.

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Ailing power utility Eskom is set to receive a multi-billion rand bailout which, according to report by the City Press, the taxpayer might have to contribute towards funding the hefty figure.

President Cyril Ramaphosa announced in his State of the Nation Address (SONA) on Thursday that the state-owned enterprise will receive a R230 billion bailout to aid its operations over the next ten years.

The president said digging Eskom out of its financial hole was important, as the company could not afford to fail, and it defaulting on its loans would have an adverse effects on the national fiscus which, on its own, was already constrained.

“With the current committed funding from the government outlined in the 2019 budget, Eskom has sufficient cash to meet its obligations until October 2019,” Ramaphosa said in his address.

For Eskom to default on its loans would cause a cross-default on its remaining debt and would have a huge impact on an already constrained fiscus.”

Cyril Ramaphosa

According to Ramaphosa, an urgent Special Appropriation Bill is to be tabled in order to allocate a fair chunk of the funds needed Eskom, with Finance Minister Tito Mboweni set to provide further details “in due course”.

How government could pay for the Eskom bailout

As the City Press reports, the bailout is likely to be funded by a combination of loans, a reallocation of government expenditure, as well as a tax hike. It’s stated that the latter will come into effect in 2020.

Eskom was recently allocated a financial support package of R69 billion which, according to Ramaphosa, is enough for it to meet its obligations until October 2019.

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