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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Eskom Unbundled

In this section of the budget speech, he also gave some very interesting insight on how the separation of Eskom would work, from a financial point of view. In the state of nation address earlier this month by President Cyril Ramaphosa, an announcement was made that Eskom will be split into three separate entities, in a bid to stabilize the finance and governance problems of Eskom. You can read more on that here.

Financial Summary

Before delving into the conditions that was set by the finance minister, Tito Mboweni, it’s perhaps a good idea to just have a over view of the current situation with regards to the situation at Eskom. Eskom, who does not make any profit off the current price of electricity, have a total debt of R419bn. They have reportedly asked for a support package of R100bn.

Conditional Relief

The financial support announced by Mboweni yesterday, amounts to R23bn per year, over three years. “We are setting R23bn a year to financially support Eskom during its reconfiguration”, he told parliament. However there are conditions. The financial injection is also meant to support the separation of Eskom and to that end. Part of the condition is that a “Chief Reorganization Office”, will need to be appointed by Mboweni and Public Enterprises minister, Pravin Gordhan. The elected person will work with the board of Eskom and management to carry out the recommendations of the Presidential task team.

Finance minister, Tito Mboweni said that more announcements would be made in the coming weeks.

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