'Pouring money directly into Eskom in its current form is like pouring water into a sieve.'
JOHANNESBURG – Finance Minister, Tito Mboweni, in his first Budget Speech announced that the government would give state-owned power utility Eskom a R69 billion bailout over a period of three years.
Mboweni said in his speech, “The SOEs pose very serious risks to the fiscal framework. Funding requests from SAA, SABC, Denel, Eskom and other financially challenged state-owned enterprises have increased, with several requesting state support just to continue operating. Isn’t it about time the country asks the question: do we still need these enterprises? If we do, can we manage them better? If we don’t need them, what should we do?”
Mboweni added on Eskom, “In the State of the Nation Address, the President announced a clear and executable plan for electricity. At the core of this plan is the subdivision of Eskom into three independent components. This will set the electricity market on a new trajectory, and allow for more competition, transparency and a focused funding model.
“Pouring money directly into Eskom in its current form is like pouring water into a sieve. I want to make it clear: the national government is not taking on Eskom’s debt. Eskom took on the debt. It must ultimately repay it. We are setting aside R23 billion a year to financially support Eskom during its reconfiguration.
“The fiscal support is conditional on an independent Chief Reorganisation Officer (CRO) being jointly appointed by the Ministers of Finance and Public Enterprises with the explicit mandate of delivering on the recommendations of the Presidential Task Team. We will make announcements in this regard in the coming weeks. Minister Gordhan and the strong team he has built at the Department of Public Enterprises will continue to exercise close and ongoing monitoring of Eskom,” Mboweni further added.
Ahead of Mboweni’s speech, Rob Cooper, a tax expert at Sage, told Business Report, “Judging from his Medium-Term Budget Policy Statement in October last year, I expect Minister Mboweni—backed by the team in the National Treasury—to deliver a relatively cautious budget. Much of the focus will be on refinancing the state-owned enterprises and putting them back on to a sustainable footing.
We asked our readers ahead of the Budget Speech if they thought Mboweni should announce a bailout for South Africa’s struggling state power utility, Eskom, this is how they voted: