Sat. Jul 20th, 2019

SONA 2019: Why we should expect another massive Eskom bailout

Eskom SONA 2019They have had two multi-billion rand bailouts already this year, but it looks like a hat-trick could be on the cards for Eskom during SONA 2019.

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It’s the issue that dwarves all other issues on the table for the second part of SONA 2019 – a supermassive black hole in a galaxy of modest planets. Eskom is the government’s unshiftable burden, and it’s looking increasingly likely that billions more will be thrown into the utility’s void.

It’s been a little over four months since the electricity giants received a R69 billion bailout from the government. That came with the implementation of a task team that gave the Public Enterprises Ministry much more sway in the way things worked at Eskom. The mammoth fee is subject to the company meeting certain performance targets.

Why Eskom is in line for another bailout during SONA 2019

However, it’s likely that the 11-figure sum still won’t be enough to prop up the flailing firm. For a start, Cyril Ramaphosa was locked in discussions with Eskom executives for the majority of Tuesday. The board have already expressed what funds they will need, and are believed to be in bullish mood following a successful start to winter.

A quickly-devised turnaround strategy was implemented in April, and since then, no load shedding has occurred in South Africa. It has been three months since the indignity of Stage 5 power cuts were foisted upon citizens across the country, and the government want to prioritise the establishment of an “uninterrupted” electricity supply.

How much will Eskom get?

That’s going to take much more money than originally pledged, but according to Mogajane Dondo, it’s already a matter of “when, not if”. The Treasury Director has already stated that his department is bracing for another bailout during SONA 2019, but he remained tight-lipped on the amount that was forthcoming for Eskom.

Furthermore, the board at the utility are now in a slightly better negotiating position. With no load shedding forecast for the foreseeable future, and their well-publicised nine-point-plan taking shape, Eskom have made some key alterations. They now go cap-in-hand to the president with a shred of credibility.

South Africa “forced” into rescue

There is still so much work to be done, though, and South Africa is effectively tied to Eskom’s anchor. The group produces over 95% of the country’s electricity, and although many South Africans have fantasised about the end of their turbulent existence, Bloomberg believe that it would only lead to further economic strife.

Damned if we do, and damned if we don’t: But Cyril Ramaphosa has vowed to ensure that Eskom will not go under – in his own words, the group is “too big to fail“. It’s widely understood he will address the funding issue on Thursday and, with all things considered, you can expect the state to dig Eskom out of trouble once again.

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