The annual budget speech was tabled by finance minister Tito Mboweni in parliament yesterday, where he has made announcement about how South Africa will approach the coming financial year. This included the stance of treasury on state-owned companies. In his speech, he mentioned that the struggling utility Eskom, will be allocated an amount of R69bn over three years to help it with it’s service debts. But he stresses the fact that this does not mean that government will take on the debt of Eskom.
In this section of the budget speech, he also gave some very interesting insight on how the separation of Eskom would work, from a financial point of view. In the state of nation address earlier this month by President Cyril Ramaphosa, an announcement was made that Eskom will be split into three separate entities, in a bid to stabilize the finance and governance problems of Eskom. You can read more on that here.
Before delving into the conditions that was set by the finance minister, Tito Mboweni, it’s perhaps a good idea to just have a over view of the current situation with regards to the situation at Eskom. Eskom, who does not make any profit off the current price of electricity, have a total debt of R419bn. They have reportedly asked for a support package of R100bn.
The financial support announced by Mboweni yesterday, amounts to R23bn per year, over three years. “We are setting R23bn a year to financially support Eskom during its reconfiguration”, he told parliament. However there are conditions. The financial injection is also meant to support the separation of Eskom and to that end. Part of the condition is that a “Chief Reorganization Office”, will need to be appointed by Mboweni and Public Enterprises minister, Pravin Gordhan. The elected person will work with the board of Eskom and management to carry out the recommendations of the Presidential task team.
Finance minister, Tito Mboweni said that more announcements would be made in the coming weeks.