Eskom received R242 billion in bailouts – but cannot keep the lights on
Eskom received R242 billion in bailouts between 2013/14 and 2022/23, with an additional R254 billion debt-relief arrangement announced this year.
Despite the tremendous amount of money given to Eskom in bailouts and government guarantees, the power utility is in a worse state now than ever.
A National Treasury presentation to the Standing Committee on Public Accounts on state-owned company bailouts and government guarantees reveals how much Eskom burned through.
In 2008, Parliament approved that funding totalling R60 billion be provided as a subordinated loan to Eskom to support its capital expenditure programme.
The money was appropriated as follows – R10 billion in 2008/09, R30 billion in 2009/10, and R20 billion in 2010/11.
To strengthen Eskom’s balance sheet, the cabinet approved the provision of a support package in September 2014. It included concerting the existing R60 billion subordinated loan to equity.
The conversion of the subordinated loan did not have a direct cash flow impact either for Eskom or the government.
The support package also included an allocation of R23 billion to Eskom, which was to be funded through the sale of non-strategic assets.
Over the period 2015/16 to 2022/23, Eskom received bailouts of R181.55 billion, excluding the conversion of the subordinated loan.
With the subordinated loan conversion, Eskom received R242 billion in government bailouts over the last decade.
However, this is not the only money Eskom received from taxpayers.
In the February 2019 Budget Speech, the finance minister said the government had set aside R23 billion annually for ten years to financially support Eskom. It amounted to R230 billion.
However, due to a decline in Eskom’s financial position, a Special Appropriation Bill was tabled to allocate a significant portion of the R230 billion fiscal support earlier than planned.
Of the R230 billion government support package, Government has provided R158.6 – R49 billion for 2019/20, R56 billion for 2020/21, R31.7 billion for 2021/22, and R21.9 billion for 2022/23.
Of R21.9 billion in equity allocated for the 2023 financial year, R11 billion was received by 31 December 2022, with the remaining balance received in January 2023.
In the 2023 budget, the finance minister proposed a total debt-relief arrangement for Eskom of R 254 billion. This consists of two components.
- One is R184 billion. This represents Eskom’s full debt settlement requirement in three tranches over the medium term.
- Second is a direct take-over of up to R70 billion of Eskom’s loan portfolio in 2025/26.
Because of the debt relief structure, Eskom will not need further borrowing during the relief period.
The government will finance the arrangement through the R66 billion baseline provision announced in the 2019 budget and R118 billion in additional borrowings over the next three years.
Eskom bailouts squandered
What frustrates South African taxpayers is that a large chunk of Eskom’s bailouts was stolen through corruption and fraud.
Former Eskom CEO Andre de Ruyter revealed astonishing fraud and corruption at the state utility involving senior government officials.
In his new book, Truth to Power, De Ruyter said he quickly realised something was wrong when he took over as Eskom CEO.
Watching the exit gate of Megawatt Park, he was astounded to see a number of Range Rovers, BMWs, Mercs and Porsches heading for the exit at 15:30 in the afternoons.
Eskom employees’ flaunting of wealth wasn’t limited to fancy cars. Many junior Eskom employees clutched Louis Vuitton handbags, equivalent to a month’s salary.
“Either Eskom employees were living way beyond their means, or they had access to funds from other sources. It didn’t take Sherlock Holmes to figure out what was afoot,” De Ruyter said.
The deceitful habits formed during the state capture era under former President Jacob Zuma and the Guptas had clearly not yet been broken.
While politically connected individuals, contractors, suppliers, and Eskom employees stole the power utility dry, South African taxpayers were hit with load-shedding and large electricity price hikes.
The billions of taxpayer money the government gave to Eskom did nothing to improve its operations of financial situation.
The situation continued to deteriorate to a point where Eskom was in a hopeless financial situation, struggling to find the money for maintenance, diesel, and new projects.