Cape Town - WHILE the government is mulling over taking over a portion of Eskom’s R400 billion debt, the unbundling of the cash-strapped power utility into three separate companies is under way.
The country has been subjected to the worst period of load shedding in recent months as the utility battled to keep the power on.
Finance Minister Enoch Godongwana, in delivering his medium term budget policy statement (MTBPS) on Wednesday, said the planned takeover of Eskom’s debt is cardinal as “Eskom does not generate sufficient revenues or control its costs”.
“Reducing its debt will ease financial pressure on the utility, enabling it to implement a viable unbundling process and freeing resources for investment in critical electricity supply,” Godongwana said.
“Government will apply strict conditions to this debt relief, including the timeous execution of measures to address the sustainability of newly unbundled businesses. Further details will be provided in the 2023 budget.
“While the selection of the relevant debt instruments and the method of effecting the relief is still to be determined, the quantum is expected to be between one-third and two-thirds of Eskom’s current debt.”
Godongwana’s mini budget speech makes it clear that Eskom is the biggest known risk to the economy and public finances, and therefore suggests that “a lower debt burden will enable Eskom to implement a viable unbundling process and make resources available for investment in critical electricity supply and transmission infrastructure”.
Setting a plan for Eskom’s debt would mark a key step toward turning around the engine that drives Africa’s most industrialised nation, after years of government bailouts and rolling power outages that have weighed on the economy.
During his State of the Nation Address in 2019, President Cyril Ramaphosa announced the unbundling of Eskom into into generation, distribution and transmission units to aid the struggling power utility.
The MTBPS also highlighted the fact that planned power cuts have increased consistently since 2017.
“Eskom estimates that the electricity supply shortfall has risen to between 4 000 and 6 000 megawatts, limiting its ability to adequately service electricity demand and undertake required maintenance,” read the report.
Gross value added in the electricity, gas and water sector was 1% lower in the first half of 2022 compared to the same period in 2021, according to the MPTBPS.
“Structural impediments, including high tariffs, illegal connections and ageing infrastructure, will continue to constrain the sector in the near term, with Eskom’s power plants continuing to perform poorly and unreliably. According to Eskom, load shedding is forecast to persist over the next 18 months.”
In July Ramaphosa announced emergency measures to combat the electricity crisis.
He prioritised the performance of existing power stations and the adding of new generation capacity to the grid.
More recently, the amendment to Schedule 2 of the Electricity Regulation Act (2006), removing the licensing threshold for embedded generation projects, has been published for public comment.
Weekend Argus.