Huge change to Eskom’s R254-billion bailout
Finance minister Enoch Godongwana has announced that Eskom’s R254-billion bailout will no longer be interest-free.
Godongwana announced in February that South African taxpayers would take over more than half of Eskom’s debt.
This would take the form of an interest-free subordinated loan to be settled in Eskom shares rather than cash.
However, the bailout would come with strict conditions on Eskom, including that it may only be used to settle debt and interest payments.
In addition, Eskom could not incur additional debt during the relief period without Treasury approval.
“One key condition we set back then was that should Eskom defy any of the conditions, the loan would not be converted to equity,” Godongwana stated.
“The Eskom Debt Relief Amendment Bill which we are tabling today seeks to enhance the enforceability of the conditions agreed under the debt relief agreement.”
In addition to making the subordinate loans interest-bearing, the Amendment Bill also lets the minister adjust the amounts of the debt relief under certain conditions.
“[It] provides for the reduction of the amount of debt relief available to Eskom, in the event that the entity does not comply with the National Treasury conditions,” said Godongwana.
“These principles and strict conditionalities, greatly enhanced by the Amendment, are a key part of how we will deal with Eskom and all other state-owned entities, to avoid a repeat of the mistakes of previous bailouts.”
Treasury has said that as of the end of September, only R16 billion of the R78 billion debt relief for 2023/24 had been disbursed to Eskom.
In Eskom’s annual results for the financial year ended 31 March 2023, released yesterday, the state-owned power utility revealed that its net debt had increased by 2% to R399 billion.
Acting Eskom chief financial officer Martin Buys summarised the company’s debt situation as follows:
- Debt securities and borrowings increased by 7% from R396 billion to R424 billion
- Lease liabilities reduced by 6% from R8.6 billion to R8.1 billion
- Cash and cash equivalents decreased by 53%, and payments made in advance by 11%
- Overall, this resulted in Eskom’s net debt increasing by 2% from R389 billion to R399 billion.
Eskom’s revenue had increased by 4.8% to R259.5 billion.
However, its expenses had also increased substantially during the year, resulting in a net loss after tax of R23.9 billion.
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