Eskom is reportedly in the process of asking government to take R100 billion worth of debt onto its own balance sheet. This debt swap would be the single largest bailout of a state-owned entity in the history of South Africa and makes all the other bailouts fade into the shadows.
The Democratic Alliance (DA) will be writing to the Chairperson of Eskom to ask for complete transparency on this debt swap. We will be requesting that the Eskom board present this information to an urgent Public Enterprises Parliamentary Committee meeting. South Africans are literally in the dark given the current power outages across the country, we cannot be left in the dark around this debt deal. The reality is that the Eskom power crisis we find ourselves in has been caused by the failing ANC. The ANC government has, through corruption and mismanagement, destroyed Eskom’s ability to provide power to South Africans. This has devastating consequences for the economy and ordinary South Africans.
Based on our preliminary calculations this debt swap would add between 1.5% and 2% to the government’s debt to GDP ratio. This would deviate critical resources away from basic service delivery, social grants, health care and education towards servicing Eskom’s debt. It would also pose massive risks to the fiscus with further negative reactions expected from the ratings agencies. These reactions could lead to further ratings downgrades which would pile on the pressure as the cost of financing SA’s burgeoning debt would balloon.
Another big question mark is whether National Treasury has been consulted around this debt swap and whether they are on board. From initial reports, Eskom has gone directly to the market and told investors this deal will happen, freeing up Eskom to borrow more. However, Tito Mboweni, SA’s Minister of Finance, has already commented on Eskom debt, stating that it should access the international bond markets rather than seek another bailout from the South African government.
Clearly there is a massive gulf between the Minister of Finance and Minister of Public Enterprises around Eskom and the way forward. This gulf hinges on Eskom’s turnaround strategy which was meant to be presented this year. It has now been pushed into 2019 after at least two delays given the recent blackouts.
Minister Gordhan has had just under a year to turn things around with little to show for it. The double whammy of high finance costs to pay for Eskom debt coupled to a high wage bill is crippling the entity’s cash flow.
Eskom desperately requires a complete restructure with a split into a separate generation and transmission entity, as proposed by the DA. Tough action is needed to turn around what has been an ANC caused disaster. The DA’s plan will free up the energy sector to greater competition; allow other energy producers to deliver power on an equal footing; stabilise the provision of electricity and lead to much-needed jobs.
As South Africa emerges from the dark days of state capture, we need clear, transparent and credible answers around Eskom’s power outages, turnaround strategy and debt plans. The DA will make sure this happens.