The government is seeking a plan to allow Eskom to breach its bailout agreement with the National Treasury and accept billions in loans aimed at reducing carbon emissions.
Reuters recently reported that the Finance Ministry appointed an unnamed consultant to come up with a plan that will allow Eskom to access money from international pledges, despite its agreement with the National Treasury.
This agreement is in regard to the Eskom Debt Relief Bill tabled by the National Treasury earlier this year.
As per the agreement, the government will take over more than half of Eskom’s current debt, with a total bailout package of R254 billion.
Among many strict conditions, the agreement stipulates that Eskom cannot take on any more debt and imposes conditions that restrict the utility’s access to loans for three years, pending written permission from the Finance Minister.
However, in November 2021, wealthy nations, including the UK, France, Germany, the EU, and the US, pledged $8.5 billion in funding to help South Africa transition away from coal. Over $3 billion was intended to be a loan for Eskom.
According to Reuters, Eskom’s bailout deal and its conditions put the international pledges of green funding “in limbo”.
The obvious solution to this problem would be for the Finance Minister to make a written exception to this requirement, which the agreement allows.
However, according to Reuters, this would require complex recalculations and more parliamentary procedures.
Therefore, the Treasury and the Presidency appointed an unnamed consultant to find a solution to allow the funding disbursement without negatively impacting Eskom’s balance sheet.
The government is in regular contact with international donors and plans to present a report on potential solutions by August.
A decade of bailouts
Aside from the R254 billion debt-relief arrangement announced this year, the National Treasury has awarded Eskom R242 billion in bailouts between 2013/14 and 2022/23.
However, despite this tremendous amount of money given to Eskom in bailouts and government guarantees, the power utility is in a worse state now than ever before.
South Africans have experienced more load-shedding in the first few months of 2023 than in the whole of 2022, and the country has yet to reach the peak of winter.
According to former Eskom CEO Andre de Ruyter, a lot of the money the utility received to improve its performance was stolen through corruption, adding to taxpayers’ frustration.