Finance Minister Tito Mboweni has conceded that the additional R59 billion required by Eskom to stay afloat will come at “a significant cost” to South African taxpayers.
He also revealed that this year’s tax revenues could be significantly lower than anticipated resulting in the country needing to borrow more.
Mboweni, on Tuesday morning in Parliament, introduced a special appropriation bill as a lifeline for the trouble state-owned entity saying that an additional R26 billion would be needed for the 2019/2020 financial year while an extra R33 billion would be needed for the following year.
“Honourable members should also be reminded that the fiscal support we are announcing today will come at a significant cost to the fiscus and to the South African taxpayers. In addition to the financial support to Eskom, there is also a preliminary indication that tax revenue could be significantly lower than budgeted for in the 2019 budget. This could substantially increase the government borrowing requirement for 2019/2020, which will require government to revise its funding strategy and current weekly bond issuance levels before the medium term budget statement in October,” Mboweni told the National Assembly.
He said that Eskom’s survival was dependant on restructuring and that he had been in talks with Minister of Public Enterprises Pravin Gordhan on who the best option might be to take on that role.
He said that the new chief restructuring officer was likely to be announced on Tuesday.
Mboweni reiterated that Eskom was at a high risk of a systemic failure and said that the operational and financial challenges faced by the state-owned enterprise were caused by “the governance challenges that the entity previously experienced which resulted in a decline in investor confidence”.
Government had initially committed R23 billion to be allocated to Eskom over the next three years, but Mboweni said the additional cash injection is necessary in order for the power utility to meet its financial obligations.
“I wish to repeat what I said in my budget vote speech: We really and truly cannot go on like this. Therefore, it is important that government urgently implements the restructuring of Eskom into three entities – generation, transmission and distribution.”