SA forced into emergency aid payout to troubled Eskom

Less than a week after the boss of South Africa’s Eskom declared “the days of surprises are over,” documents show the government was forced to pay R5 billion ($355.2 million) in emergency funds so the state-based utility could meet obligations.

Read: Eskom CEO says ‘days of surprises’ over as power plans in place

The payment on April 2 was intended to let Eskom pay bills due at the end of March, and avoid a call on its existing guarantees after a loan expected from the China Development Bank failed to come through in time. The amount repaid a R3 billion bridge loan from Absa, according to a letter to parliament from finance minister Tito Mboweni and released by the opposition Democratic Alliance.

The government announced a record R69 billion bailout for Eskom in February to be paid over three years. Of that, R23 billion is pledged for the current financial year. Based on the 2% limit of the appropriated national budget, only R17.7 billion can be transferred. The remaining balance will have to be subjected to the normal appropriation process when parliament is constituted after the May 8 election.

Read: Eskom gets R17.7bn of planned support

The R23 billion required a special bill that didn’t come up before parliament completed its business before the election. The National Treasury had targeted disbursement between August and October 2019.

Election recess

“Because were are in recess for the election period we can not process any new bills which have to go through a proper procedure of consideration and engagement with stakeholders,” Pinky Phosa, chairwoman of the National Assembly appropriations committee, said by phone from Johannesburg. “The new parliament will have to consider these reports once it takes over.”

President Cyril Ramaphosa is under pressure to chart a new strategy for the money-losing utility while retaining the support of trade unions ahead of the vote. He also needs to preserve South Africa’s sole investment-grade credit rating with Moody’s Investors Service. Rating companies have cited Eskom as one of the biggest risk to the sovereign.

Mboweni warned that Eskom doesn’t expect to be able to generate enough internal cash to meet its obligations over the next five years. The government and Eskom are in talks on how to secure the company’s “long-term financial sustainability.”

“Even after accounting for funds raised, cash flow is not adequate to fund its capital expenditure program,” he said.