Mon. Oct 21st, 2019

Eskom hobbles on as bailout is brought forward

Eskom electricity priceFive Billion Rand has been rushed to beleaguered power supplier Eskom to prevent the company from defaulting on its financial obligations.

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The South African government has been forced to bring its proposed bailout of parastatal power firm Eskom forward to this month.

R5 billion of the bailout announced in February had to be rushed to avert a default on its obligations by the power provider.

Eskom supplies more than 90% of electricity to South Africa but has suffered under years of mismanagement leaving it with cashflow problems and mounting debt.

The bailout was only meant to reach Eskom between August and October of this year but with the threat of more and more intense load shedding hanging over the economy the feeling was that action had to be taken immediately.

Finance Minister Tito Mboweni authorised the cash transfer on 2 April in response to the power companies difficulty in raising funds internally.

Tariff hikes come into effect in April but even those alongside the government bailout are expected to be insufficient to address the financial issue plaguing Eskom.

A report to parliament from the finance ministry read: “Eskom does not anticipate generating sufficient internal cash to pay all of its maturing obligations at any point in time over the next five years.”

DA Shadow Minister of Finance accused the ANC of covering up the extent of the problems with Eskom in a press release sent out this week.

“The Democratic Alliance (DA) notes that the Minister of Finance, Tito Mboweni, as is required by section 16 (4) (a) of the Public Finance and Management Act (PFMA), tabled in Parliament today a report which details a bailout to Eskom to the tune of R17.652 billion. The first R5 billion was paid to Eskom on 2 April 2019. This report was snuck into the ATC without much fanfare to hide the true extent of this crisis.

“Minister Mboweni indicates in his report that the amount was limited to R17.652 billion by Section 16 (2) of the PFMA which limits such “emergency” funding to a maximum of 2 percent of the appropriated national budget. This clearly indicates that the cash crisis at Eskom is far worse than the R 17.652 billion and that the amount would have been far greater had this limitation contained in Section 16 (2) not existed or was higher.

“The Fifth Parliament remains in operation and it is the view of the DA that there is an urgent need for the Parliamentary committees of Finance, Appropriations and Public Enterprises to hold a joint meeting to be fully briefed on the financial crisis facing Eskom, and to provide a report with recommendations to Parliament.”

Lees slammed the ANC’s handling of the crisis and accused the ruling party of obfuscating Eskom’s woes.

“It has long been public knowledge that Eskom is bankrupt. The entity had run out of cash to keep its operations going a long time ago and has been fighting to keep providing electricity desperately needed to keep economic activity going and to avoid a recession. It is extraordinary that this crisis was so obvious that even Minister Mboweni was forced to include a current year bailout for Eskom of R23 billion but failed to introduce a special appropriation bill to ensure the funds were available for Eskom to keep the lights on,” Lees added.

Eskom are due to receive R23 billion per year under the terms of the bailout , which experts believe will not be sufficient to make the organization financially viable.

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