Ramaphosa says Eskom’s financial position ‘remains untenable’

President Cyril Ramaphosa said that the state-owned power utility’s financial position “remains untenable” and urged non-paying citizens to change a culture of non-payment and settle the “huge amounts” owned to the cash-strapped producer.

Read: Eskom wants government to take over majority of its debt

Eskom, which supplies about 95% of the country’s power and is seen as the biggest risk to the economy, has R450 billion of debt and is surviving on state bailouts after massive cost overruns at two partially completed coal-fired power plants. Citizens endured four days of controlled blackouts last week to prevent the total collapse of the grid. Power shortages and policy uncertainty have damped economic growth and plunged business confidence to multi-decade lows.

“The sheer scale of Eskom’s debt is daunting,” Ramaphosa said in a statement Monday. “Further bailouts are putting pressure on an already constrained fiscus.” South Africa will “soon” announce the appointment of a permanent chief executive officer for the utility and “shortly” release a special paper on the path the CEO and a strengthened board should take, he said.

Eskom is owed R23.5 billion by defaulting municipalities, a figure that keeps increasing, and “huge amounts” of money by individual users, Ramaphosa said. By the end of March, the Soweto area in southwestern Johannesburg owed R18 billion alone, Eskom said in July.

“This is the time for a frank discussion on the payment of owed money to Eskom by individual users,” he said. “Boycotting payment for services had a place in apartheid South Africa. It was an effective tool to mobilise communities against an unjust system. But it has no place in present-day South Africa. If public utilities like Eskom are to survive, then all users need to pay for the services they receive.”

Last week, the government published its latest Integrated Resource Plan, which maps out the energy mix for the next decade. It includes a switch to more green energy as the country, which sources most of its electricity from coal, faces pressure to meet emissions-reduction targets.

Read: Eskom wants government to take over majority of its debt

South Africa will develop a framework to take ageing coal-fired plants out of service, Ramaphosa said. While this will present challenges for communities and workers where fossil fuel-powered energy generation takes place, “it also presents opportunities for those affected to have access to technologies that are more cost-effective and better for human health.”

© 2019 Bloomberg L.P.