Eskom’s bailout gets green light

Taxpayers’ loss of more than R80bn a fraud, DA says

THE National Assembly has passed two bills as a bailout to Eskom, totalling R83-billion, against vehement opposition by the DA – which called it a fraud – and some small opposition parties. Of the total, R23-billion is to come from the sale of state assets, and R60-billion from what is essentially the write-off of a government loan to itself as the only Eskom shareholder.

This will cost the taxpayer R82-billion in lost interest.

Senior ANC MP Paul Mashatile said South Africa needed sustained and higher levels of economic growth to achieve its key national objectives.

A strong and sustainable Eskom was necessary for the economy to grow more rapidly, because electricity shortages had become the greatest obstacle to the country’s growth and development trajectory.

“Eskom supplies 95% of South Africa’s electricity and is the fourth-largest power utility in the world in terms of installed capacity,” Mashatile said.

“Eskom is currently undertaking a R280-billion capital infrastructure programme over five years and building two of the biggest coal-fired power plants in Africa.

“It is important to note that since 2001, Eskom has added 32 generating units and plans on increasing the number of current units to 121.

“Eskom is facing challenges that threaten its sustainability and thus the growth and development objectives of the state, including the provision of very low tariffs which were inadequate to address future and current investment and the lower than anticipated electricity demand which has resulted in lower revenues.

“Furthermore, Eskom has been incurring additional costs to keep the lights on by running the more expensive power plants – open cycle gas turbines,” Mashatile said.

To ensure that the R23-billion funding allocation did not have an impact on the budget deficit, it was to be funded through the sale of non-strategic government assets and the appropriations were to be made as the funds were received into the National Revenue Fund.

“The conversion will strengthen Eskom’s balance sheet as the R60-billion will be reflected as equity, resulting in an improvement in Eskom’s debt-to-equity ratio,” he said.

“The conversion will also improve financial ratios which affect Eskom’s position with rating agencies, and also free up additional borrowing capacity.”

According to Mashatile, the ANC agreed with public inputs on the bill that highlight the need for Eskom to improve its operational effectiveness significantly and ensure stability in electricity generation.

“In this regard, Eskom is to develop and set explicit targets and submit quarterly reports on its cost-containment programme, working capital management, procurement effectiveness, and its business efficiency programme,” he said.

DA MP Malcolm Figg said the secrecy contained in the report on what state assets had to be sold meant the DA could not support it.

Fellow DA MP Alan McLoughlin said it was important that South Africans understood that the amount [essentially being written off] was “sixty thousand million rand”, which was huge.

“And whose money was it? It was yours and mine and every one of our millions of taxpayers,” he said.

“We were led to believe that this loan would solve Eskom’s problems.

“While I understand that Eskom needs to be funded to fulfil its mandate, this is not the way to do it.

“After seven years of paying no interest, the government’s investment of R60-billion is now valued at only R29.5billion. I call that an unscrupulous and unconscionable fraud against every citizen of this nation.

“In exchange for the loan, the government is getting equity in Eskom.

“Equity is normally shares that receive dividend payments from time to time – an exchange of one type of investment for another.

“However, this is another fiction. How do you get given a share of something that is already yours?

“Eskom has also never paid a dividend, has no plans to do so, and probably never will. Not much of an investment,” McLoughlin said.

The EFF walked out of the debate in protest against what it called partisan chairing by deputy speaker Lechesa Tsenoli.

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