New Development Bank ‘not worried’ about Eskom repaying R11bn loan

2019-03-26 23:10

The bank is looking at priorities and, given the urgent need, the specific-purpose loan will ensure that the public utility puts more power into productive use

The New Development Bank (NDB) will be keeping an eye on the restructuring plans at Eskom, but will not be waiting for the process to unfold before approving the power utility’s two loan applications to the value of $780 million (approximately R11 billion).

So said the NDB president, Kundapur Vaman Kamath, who pointed out during a telephonic interview that approving Eskom’s loan application was a priority as the government, and Eskom in particular, were under strain.

“Our own assessment is that the restructuring could take time and the need is urgent – so we will proceed with the loan now so that the need is met,” he said.

“We are looking at the priorities. These seem to be in the area of infrastructure and, within that area, power seems to be the first thing that the country needs. We have read that Eskom is likely to be restructured and we believe it is what the country needs,” he said, adding that the bank would approve Eskom’s loan as a priority and with urgency.

Kamath said South Africa had an impressive uptake on the bank’s loans: more than $1.5 billion had been loaned to the country and, by the end of the year, the figure would have been increased to $2.4 billion.

Asked if the bank was not worried about Eskom’s ability to repay the loan, given its dire financial position, Kamath said the bank was not worried as the loan would be guaranteed by the government and, should it fail, the state would have to cover it.

“It’s a specific-purpose loan [for $480 million] to ensure that Eskom puts more power into productive use. The need is urgent and what we are now funding is to make sure the new capacity they [Eskom] set up in the Medupi power project is brought online,” he said.

A NDB spokesperson said that Eskom had applied for a second loan for $300 million to improve its battery storage capacity.

Read: Eskom needs private money

The bank had deliberately channelled more funds to renewable energy, Kamath said.

He pointed out that the first year of the bank’s existence, from July 2015, resulted in all loans being directed to green energy projects and thereafter more sectors were considered.

“Our scope of projects has become quite wide in the past three years.”

Kamath said South Africa had an impressive uptake on the bank’s loans: more than $1.5 billion had been loaned to the country and, by the end of the year, the figure would have been increased to $2.4 billion.

This figure included a R3.2 billion loan to the Lesotho Highlands Water Project which, although it was being built in a neighbouring state, was guaranteed by the South African government.

“We have a fairly strong pipeline and we are hopeful that by the end of the year we would have done $2.4 billion in loans to South Africa. We have an appetite to do more,” he said.

Read: Eskom shock: ‘Errors’ could push up electricity prices by 50%

Kamath said Brazil, which has taken up very little money in loans from the bank, had just streamlined its processes to access loans.

“When we started, we found two of our members, China and India, had the most streamlined systems and were able to apply for loans.

“We found the other three countries – Russia, South Africa and Brazil – had different systems.

“Russia got it right last year. South Africa is getting it right now. Brazil is busy and should get it right by the second half of this year.

“It’s not the hesitancy to borrow, but more about how to go about borrowing,” he said.

New Development Bank loans to the South African government

Kamath said the bank would open an office – the Americas regional office in Brazil – later in the year and that should make things much simpler.

In August 2017 the bank had officially opened its Africa regional centre in Johannesburg, Kamath said.

The regional centres worked closely with the government, and public and private sector agencies to identify projects with a strong development impact that could be supported by the NDB.

Next on City Press

Read News24’s Comments Policy publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Add your comment
Comment 0 characters remaining

January 26 2020