DOES ESKOM BAILOUT ACCOUNTING FLATTER TO DECEIVE?
The debate over the way the utility’s R254bn debt package has been accounted for in the 2023 budget raises interesting questions about the health of SA’s public finances and whether the public is being shown the full picture
However, cash payments to Eskom will reduce Eskom’s liabilities while the NRF will be increasingly encumbered by debt.
And because the R66bn three-year bailout previously awarded to Eskom now falls away, and the new R254bn package is not reflected in the deficit, the upshot has been an inflated or misleading improvement in the primary surplus (revenue minus noninterest expenditure).
This may just sound like a technical quibble, but, given that the budget deficit arguably no longer represents the full extent of the government’s fiscal health, it should also matter to the public.
It is particularly problematic, given that the Treasury has been explicitly targeting a primary surplus for years as a prerequisite for getting debt to stabilise. The last time South Africa achieved a primary surplus was just before the global financial crisis, at the end of a protracted commodity boom the debt ratio has been rising ever since.
So, the achievement of a primary surplus in 2022/2023, and the budgeted forecast that the country will run everlarger primary surpluses over the medium term, would normally have been an important signal that South Africa was finally getting on top of its fiscal challenges.
Instead, the Treasury is now trying to downplay the importance of this achievement. In defending its handling of the Eskom bailout, acting director-general Ismail Momoniat says in a recent article in FM sister publication Business Day: “One should always look at all the fiscal ratios in the to get an accurate sense of the fiscal picture over time. Focusing on some, like the primary balance, and not others, like the gross borrowing requirement, creates misunderstandings.”
But this is exactly the problem: it shouldn’t. The situation has created the oddity whereby the country now appears to be showing greater spending restraint, resulting in consecutive primary surpluses, while the stock of debt is rising faster than before because of the enormous Eskom bailout.
In short, the 2023 budget is not strictly comparable with previous years. This is a major red flag for watchdogs that scrutinise South Africa’s public finances, such as
The accounting treatment of Eskom’s R254bn debt relief package has set the cat among the pigeons
Outcomes
key government programmes not
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