Brics bank’s SA meetings kick off
The Brics New Development Bank kicks off its first meetings in SA this week after announcing plans last week to lend as much as R11.2bn to Eskom in 2019 for infrastructure projects.
The Brics New Development Bank (NDB) kicks off its first meetings in SA this week after announcing plans last week to lend as much as R11.2bn to Eskom in 2019 for infrastructure projects.
Brazil, Russia, India, China and SA established the bank to mobilise resources for infrastructure and sustainable development projects in Brics and other emerging economies and developing countries.
In an interview with Business Day on Friday, Treasury deputy director-general for international and regional economic policy Vuyelwa Vumendlini said the bank had scrutinised the state-owned entity’s finances before granting the loan.
“Eskom, like any other entity, approached the bank for a loan and, like any other bank, the NDB looked at their finances and granted it a loan,” Vumendlini said. “That the NDB has given a loan shows that they are comfortable with Eskom’s finances,” she said.
Eskom is facing operational and financial challenges, and persistent load-shedding in 2019 has threatened to dent economic growth. It also has R419bn in debt it is unable to service. The Treasury said at the announcement of the budget in February that the government would give the power utility a R23bn bailout every year for three years to support the urgent operational changes planned and a new infrastructure fund.
The support is expected to continue over 10 years, amounting toR150bn.
A total R6.9bn of the NDB loan will be used for retrofitting desulfurisation equipment to make the under-par Medupi power plant compliant with new environmental standards, while R4.3bn will go towards increasing Eskom’s limited storage capacity.
There is also the potential for a R2.6bn loan to finance two more projects in 2019, including repairs to transmission lines.
When pressed about the challenges Eskom faces and the NDB’s decisions to give the power utility a loan, Vumendlini said: “The NDB does not pronounce itself on politics. No decisions that are made are politically motivated.”
She also said: “Treasury and the bank have a very close relationship, and questions about the politics did not come up.”
The bank will report to the board, comprising the finance ministers from the Brics countries, on the progress it has made in the past year.
The focus of this set of meetings was to explain the bank’s mandate to investors, CEOs and boards of stateowned entities, she said.
It will also provide more clarity on the bonds it will issue in SA in the first half of the year and what this means for investors.
“This will provide an understanding of where they can partner, what can be co-financed and what the prerequisites are for a loan,” Vumendlini said.