Mabuza: Despite ‘tough love’, govt has no intention of abandoning Eskom – South Africa

Deputy President David Mabuza has said that while government is on board with National Treasury’s “tough love” approach towards underperforming state-owned entities (SOEs), the State has no plans to abandon Eskom in its hour of financial need.

Mabuza was responding orally to questions from members of Parliament (MPs) in the National Assembly on Thursday afternoon.

SOEs came under the spotlight this week after Auditor-General Tsakani Maluleke announced that only one got a clean audit in the current year – the Development Bank of Southern Africa.

Eskom is currently facing a debt of more than R400 billion and is grappling with the National Energy Regulator of South Africa (Nersa) to get a tariff increase of 20.5% from April next year in a bid to boost revenue.

EFF MP Floyd Shivambu quizzed Mabuza in light of the announcement by the Minister of Finance in his Medium-term Budget Policy Statement (MTBPS) that the State will no longer be bailing out SOEs.

Shivambu asked what assessment has been done to determine the impact of this position by government on Eskom and what short- to medium-term plans the management of Eskom had to ensure that the entity stays afloat financially.

“The underlying message in the minister’s medium term budget policy statement is that it is fiscally unsustainable to keep bailing out SOEs in the context of diminishing resources and competing priorities.

“Any form of assistance must be focused on transforming SOEs and putting them on a path of financial and operational sustainability in a way that does not require bailouts from the fiscus,” Mabuza replied.

Eskom in the clear?

Mabuza said a turnaround at Eskom was being supported by government through the inter-ministerial task team, the Presidential SOE Council and government’s restructuring plan for Eskom. He said despite not getting new funds in the MTBPS, Eskom had financial breathing room for the next few years.

“There will be no negative implication for Eskom as this will not negatively impact what has already been provided in terms of the R230 billion support package announced in October of 2019. To date, R136.7 billion of this support has been dispersed to Eskom with the next amounts to be allocated over the next four fiscal years,” Mabuza said.

Mabuza reminded MPs that Eskom also had access to R42 billion in government guarantees, which could be accessed in 2021/22 and another R20 billion in 2022/23, as allowed in the government guarantee provisions already set up in the 2019 MTBPS.

“While challenges remain, there is a discernible effort in organisational transformation, savings and recruitment of managerial and financial skills. Eskom has achieved a saving of R14 billion in the 2020/21 financial and a target of R21 billion has been set for the 2021/22 financial year,” he said.

EFF MP Ntombovuyo Mente reminded Mabuza that former minister of finance Tito Mboweni commissioned a paper from Harvard scholars that suggested “neoliberal” reforms for SOEs including Eskom.

“In 2006 American professors also touted these policies. They have failed. Don’t you think that these failed policies are designed to collapse and sell Eskom at a discount and undermine SOEs roles in the economy?” asked Mente.

Mabuza replied: “The commitment that we have made to support Eskom in 2019 still stands. That was announced by the former minister of finance. This assistance is still valid for the next coming four years. But it is correct for the minister of finance to say constant bailouts are not sustainable”.

Mabuza added that there in the long term, government expected Eskom leadership to “work hard to be self-reliant and become profitable”, as the South African economy needed a strong and reliable Eskom.

“There is no intention on the side of government to sell Eskom. Eskom must be sustainable as a critical part in the lives of South Africans. I don’t see anything in our vocabulary that even hints at us selling,” he said.

Freedom Front Plus MP Wouter Wessels asked if Eskom’s tariff increase application will be to the detriment of ordinary South Africans, to which Mabuza replied that government was committed to offsetting the impact of hikes by allowing municipalities to buy energy from independent power producers.

Source: news24