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This bill provides for an additional amount of funds to be made available to the department of public enterprises to assist Eskom in meeting its financial commitments. The bill allows for R59bn to be appropriated from the National Revenue Fund to the DPE (Department of Public Enterprises) – R26bn of which is allocated for the current financial year (2019/2020) and R33bn is allocated for the following financial year (2020/2021).

Minister of Finance Tito Mboweni

Mboweni further told the National Assembly that the announcement of a Chief Restructuring Officer (CRO) at the state-owned power utility is imminent. Depending on the finalisation on consultations with Public Enterprises Minister Pravin Gordhan, the CRO could be announced very soon.

Mboweni told assembly that the current financial situation at Eskom is extremely serious.

“Eskom is not financially sustainable based on its current high levels of debt and its inability to generate sufficient revenue to meet its operational and capital obligations, which exposes the entity to high levels of liquidity and balance sheet risks.” – Tito Mboweni

The bill will next be referred to the Standing Committee on Appropriations for consideration. Once the bill is passed by the National Assembly it will be referred to the National Council of Provinces for consideration.

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State-owned enterprises, access to higher education, women abuse, unemployment and the revival of the economy were among the key issues that were raised during the SONA speech. The SONA proceeded quite peacefully throughout it’s duration, with no disruption from members of parliament, particular the red side of it, unlike in recent times.

Perhaps the Eskom funding announcement raised a few eye-brows. During the SONA, President Cyril Ramaphosa announced that parliament will urgently table a special appropriations bill to allocate a ‘significant portion’ of the R230bn in fiscal support that struggling power utility Eskom requires. It was not mentioned what portion in monetary terms would be allocated.

He said Eskom only has sufficient cash to meet its obligations until the end of October 2019. Eskom supplies over 90% of all South Africa’s electricity demands, yet the ailing state-owned entity power utility are struggling to generate the revenue to make a profit, neither pay off the interest on it’s mounting debt burden swhich, according to reports, is approaching R500bn.

During the SONA, Ramaphosa said the special appropriations bill had to be implemented because “Eskom is too vital to our economy to be allowed to fail”.

He said that further details would be provided by the minister of finance.

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This comes after newly sworn in mayor, Stevens Mokgalapa made mention and discussed the tariff hikes during his 2019/2020 budget speech, delivered at the Tshwane House. He also confirmed that they would be effective as of 1st of July, 2019. Below we take a closer look at the numbers:

It is quite important for resident to take note of these increases and plan accordingly. With regards to the property rates, according to Mayor Stevens Mokgalapa, “All residential properties are not charged any property rates on the first R150 000 of the value,”.

Mokgalapa said the budget was pro-poor, saying it impressed on the 28 000 City employees to deliver services to the people without excuses.

He said he was mindful that the budget was delivered during hard economic times in the country.

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Major cities around South Africa has tabled their budgets. We’ll be comparing how 3 of South Africa’s biggest cities fair in terms of the various increases residents can expect going forward:

Electricity

These three cities has proposed tariff structures in which they absorb some of the weight put down by the July tariff increase. In the City of Johannesburg, residents can expect an increase of 12.2%, Durban residents can expect an 14.4% increase. While Cape Town proposed a “controlled increase” model where residents will cough up a mere 8.8% more, with the city proposing to subsidize the rest, paying 15.63% more for bulk electricity.

Property Rates 

There are also an expected increase in property rates across these 3 cities. Increases for Durban property rates are set to be tabled for 6.9% while the City of Johannesburg residents can expect an increase in property rates of 5.5%. The City of Cape Town has stepped rates which is dependent on property value.

Water

The rates for the use of water is also set for an increase. The price of water in Durban is proposed to be increased by 15% for residential users and 15.5% for businesses. The City of Cape Town proposes and increase of 9% while the City of Johannesburg proposed an increase of 9.9%

Refuse Collection

In Durban, residents can expect to pay 9.9% more to have the refuse removed. Johannesburg proposed an increase of 7%, meanwhile in Cape Town, they’ve actually proposed a decrease, down to 5.0% from 5.7%

Higher food, fuel and electricity prices are set to make it a really tough year consumers. Important to bare in mind, these are mere proposals under scrutiny, included in their budget drafts for the year to come.

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These increases comes as a result of NERSA approving the Eskom application, as they seek to claw back their multi-billion rand debt balance. The increases are something that we as South Africans unfortunately have had to get use to. It is a sad situation and there has been an outcry, which has fallen on deaf ears and we’re resigned to the fact that this is our reality now and it’s something we have to plan around.

In more positive news, ratings agency Moody’s has been of the opinion that South Africa’s credit profile would remain stable above investment grade. This after the ratings agency skipped the issuing of it’s much waited for full assessment of South Africa’s sovereign credit rating. However, they have shared thoughts and comments around the Eskom conundrum saying the efforts of government to assist and offer Eskom with a financial package estimated to total around R150bn over the next 10 years coupled with recent tariff increase announcements “insufficient to address the company’s long-standing financial troubles”.

The power utility is about R420bn in debt. “Its debt amounts to around 8% of GDP, of which 5% of GDP benefits from government guarantees,” it said.

So please be mindful of these changes and cater for it through your budgeting. It would also be very wise to be clued up with how exactly your specific tariff has changed pre- and post- amendment.  Please consult your local municipality websites or offices, or if you are a Eskom direct customer, user this link for more information.

The post Eskom Annual Price Increase 2019/20 appeared first on Powertime.

He shed some insight with regards to the current state of Eskom, saying that not only is Eskom facing dire, potentially disastrous financial trouble but are also facing very difficult operational challenges.

“The spirit of addressing the challenges with Eskom is to grapple with the local problems and not to put these aside”, minister of trade and industry, Rob Davies said at the discussion

CAPE TOWN. DTI minister Rob Davies

To this end, he revealed that in the coming weeks, some serious announcements will be made with regards to Eskom in which he eludes to the fact that some tough decisions have been taken to assist in ensuring that the price of electricity remains reasonable to all South Africans.

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“Headquarters of Eskom, Megawatt park, north of Johannesburg. Eskom generates approximately 95% of the electricity used in South Africa and approximately 45% of the electricity used in Africa” Credit: ENCA

The first claim relates to a backdated claim for a shortfall of R21.6 billion for the year 2017/2018. Eskom says that this shortfall is down to below budget electricity sales revenue. This, according to Eskom, this seems to be the major component of this claim.

The second claim relates to it’s three-year budget. This is where they claim to be entitled to tariff hike of 90%, according to the Multi-Year Price Determination. The request for 15% hikes over the next three years is an attempt by Eskom to accommodate the country.

For the next three years Eskom will be permitted to clawback an additional R8bn from customers as a result of the adjudication of the regulatory clearing account (RCA). This accounts for an additional 4.41% increase, which will be added to the tariff. That means that should Eskom be granted its price application in full, tariffs in 2019-2020 will rise 15% plus the 4.4% allowed for by the RCA.

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No major increase of taxes

Mboweni said that government remains committed to sustainable public finances, and despite major spending pressures, the expenditure ceiling remains intact. This along with an 1.9% growth rate of non-interest spending, will see no major change in tax. The following items have also been marked for being zero-rated, these are bread and cake flour, as well as sanitary pads.

State-owned company bail-outs

The government would allocate additional funding to the amount of 1.2 billion for SA Express and 2.9 billion for the South African Post Office respectively. SARS will also receive an amount of 1.4 billion over the next three years to assist with operational efficiencies. An amount of 5 billion would be allocated for SAA as a bail-out, to assist in debt repayment.

Credit: IOL

No funds to increase state employee salary

The state employs around 1.3 million workers, who has seen above inflation salary increases of 11.2%. The public sector wage bill currently accounts for 35% of government expenditure, which is quite a bit more than what the minister finds is ideal (around 30%). State departments are tasked to find solutions to pay for the increases within the existing budgets.

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