SA Eskom runs out of cash as loan facilities dry up

PRETORIA - Eskom is in a precarious financial posi- tion and desperately trying to avoid a liquidity crisis that may render it unable to pay staff salaries and suppliers by January.

The utility confirmed on Monday it had 20 times less cash than it needs to continue funding operations, and has written to the public enterprises minister alerting her of the impending calamity.

By the end of January, the utility will run on a cash deficit of R5bn. This eventuality will come even as Eskom expects to successfully drawdown R3.8bn from existing credit facilities during the next few weeks.

Business Day can also reveal that the race to stave off insolvency began in earnest in July, when Eskom held meetings with its shareholder minister and the finance minister.

On July 26, Eskom chairman Zethembe Khoza met with Public Enterprises Minister Lynne Brown and Finance Minister Malusi Gigaba, requesting they expedite Eskom’s access to cash and help find solutions to the looming liquidity crisis.

This was 10 days after Khoza had publicly denied there was any risk of shortage working capital. In a follow-up letter dated August 28, Khoza again wrote to the ministers: “The purpose of this letter is to highlight the liquidity risks at Eskom and the mitigating actions in place to address these concerns.”

If Eskom is not able to raise enough cash, its going concern status would be in jeopardy as early as late November, when it is expected to publish its interim financial results to September, said Khoza.

In July, the Sunday Times revealed the utility would run out of cash within three months as it had fallen below the R20bn liquidity buffer, a position Eskom denied as misleading at the time.

The last time Eskom ran out of cash to pay suppliers and staff salaries, in September 2015, it turned to the government for an R83bn bailout - R23bn in cash and the balance a write-off of R60bn debt owed to the government.