daniel chigunwe
South Africa is hiring an independent contractor to advise on conditions it should attach to debt relief for state-owned power utility Eskom, Finance Minister Enoch Godongwana said.
The loss-making company’s debt pile of about R400 billion is unsustainable and the government expects to shift between one-third and two-thirds of its loan obligations onto the state’s balance sheet and attach strict conditions to the relief.
“We have not identified the conditions,” Godongwana said in an interview in Cape Town on Wednesday, adding that the National Treasury is in the process of appointing a skilled, independent party to conduct an audit of Eskom. “What we want out of this is operational efficiencies at Eskom so that they don’t come back to us.”
The Treasury expects to complete the process by the time of the budget review scheduled for February, when it is likely to quantify the support and the method of effecting the Eskom relief.
The debt transfer isn’t accounted for in updated fiscal metrics, which show government debt will peak at 71,4 percent of gross domestic product in the current fiscal year — two years earlier and almost four percentage points lower than previously predicted.
The conditions may extend to alleviating Eskom’s structural challenges that weigh on its ability to manage its costs, and lowering arrears owed by municipalities and households, Godongwana said in his budget speech.
The utility may also need to provide more clarity and transparency in electricity tariff pricing and improve the performance of its generation fleet.
Maintenance of the company’s aging, coal-fired power plants was neglected during former President Jacob Zuma’s nine-year rule that ended in 2018 — a period when state corruption was rife.
Frequent breakdowns have forced the utility to ration electricity for a record 141 days this year, according to Bloomberg calculations. — Bloomberg.
Bongani Ndlovu