On Wednesday, February 22, 2023, Finance Minister Enoch Godongwana presented the 2023 Budget Speech in Cape Town City Hall.
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He had this to report about Eskom and Energy:
The lack of reliable electricity supply is the biggest economic constraint.
Record levels of load shedding were experienced in 2022 – 207 days of load shedding compared to 75 days in 2021.
In response, we are acting decisively to bring additional capacity onto the grid. We are also working to transform the electricity sector to achieve energy security in the longterm.
As part of this, during the MTBPS we announced that the government will take over a portion of Eskom’s debt. We are doing this for two reasons:
Firstly, doing so will ease pressure on the company’s balance sheet, enabling it to invest in transmission and distribution infrastructure. It will also allow Eskom to conduct the maintenance required to improve the availability of electricity.
Secondly, R337 billion of Eskom’s debt is already government guaranteed. Explicitly taking on this debt, will reduce fiscal risk and enhance long term fiscal sustainability.
Details of the Eskom Debt Relief
We are proposing a total debt-relief arrangement for Eskom of R 254 billion.
This consists of two components. One is R184 billion. This represents Eskom’s full debt settlement requirement in three tranches over the medium term. Second is a direct take-over of up to R70 billion of Eskom’s loan portfolio in 2025/26.
Because of the structure of the debt relief, Eskom will not need further borrowing during the relief period.
Government will finance the arrangement through the R66 billion baseline provision announced in the 2019 Budget, and R118 billion in additional borrowings over the next three years.
Conditions
Honourable Members, the arrangement is accompanied by strict conditions to safeguard public funds.
These conditions include:
- Requiring Eskom to prioritise capital expenditure in transmission and distribution during the debt-relief period.
- For the company to focus on maintenance of the existing generation fleet to improve availability of electricity.
- That the debt relief be used to settle debt and interest payments only.
- And that Eskom implement the recommendations emanating from an independent assessment of its operations, which has been commissioned by the National Treasury.
Details of the debt relief, and the reasoning behind the conditions are set out in full in the online annexure.
Municipal debt
At the end of December 2022 Municipalities owed Eskom R56.3 billion and the debt is rising. Undertaking a debt-relief of this magnitude without addressing this risk would be counterproductive.
We are working with Eskom to provide a solution to this problem, wherein Eskom will provide incentivised relief to municipalities whose debt is unaffordable.
However, the relief will come with conditions.
And to avoid a repeat of debt build-up over time, the relief will attach measures, including the installation of prepaid meters, to correct the underlying behaviour of nonpayment and operational practices in these municipalities.
Eskom’s long-term financial viability depends on its customers paying their dues.
National Treasury will publish details for accessing the debt relief in a circular in March 2023. Implementation will start from 1 April.
More generally, the culture of non-payment, not only by municipalities but by all organs of state and individual household customers is concerning.
Such behaviour undermines and cripples our institutions and makes it impossible for them to deliver services.
To change this, the National Treasury is exploring ways to encourage all to improve their behaviour and do the right thing.
