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HomeBusinessEskom Will Receive Another Financial Support For Its R400 Billion Debt

Eskom Will Receive Another Financial Support For Its R400 Billion Debt

"Undertaking a debt-relief of this magnitude without addressing this risk would be counterproductive. We are working with Eskom to provide a solution to this problem, wherein Eskom will provide incentivised relief to municipalities whose debt is unaffordable."

Eskom Will Receive Another Financial Support For Its R400 Billion Debt - SurgeZirc SA
Eskom Will Receive Another Financial Support For Its R400 Billion Debt.

The government will bail out power utility Eskom for the next three years, Finance Minister Enoch Godongwana stated during his 2023 budget statement on Wednesday. Godongwana stated that the administration is working feverishly to develop plans to halt loadshedding.

“We are proposing a total debt relief arrangement for Eskom of R254 billion” Godongwana said while adding that the administration was taking decisive action to add capacity to the grid.

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“We are also working to transform the electricity sector to achieve energy security in the long term. As part of this during the Medium-Term Budget Policy Statement (MTBPS) we announced that the government will take over a portion of Eskom’s debt.

“Firstly, doing so will ease pressure on the company’s balance sheet, enabling it to invest in transmission and distribution infrastructure. It will also allow Eskom to conduct the maintenance required to improve the availability of electricity.

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“Secondly, R337 billion of Eskom’s debt is already government guaranteed. Explicitly taking on this debt, will reduce fiscal risk and enhance long term fiscal sustainability,” he said.

According to Godongwana, South Africans faced loadshedding 207 days in 2022, compared to 75 days in 2021. As a result, the Treasury Department is proposing a R254 billion total debt-relief deal for Eskom.

“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 billions of Eskom’s loan portfolio in 2025/26,” the Minister said.

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“Eskom will not need further borrowing during the relief period. 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.

“The arrangement is accompanied by strict conditions toto safeguard public funds. Eskom will have to prioritise capital expenditure in transmission and distribution during the debt-relief period.

“For the company to focus on maintenance of the existing generation fleet to improve availability of electricity,” he said.

Godongwana also stated in his budget address that measures were in place to require all municipalities to repay Eskom money. According to Godongwane, municipalities in South Africa owe Eskom R56.3 billion, and the debt is growing.

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“Undertaking a debt-relief of this magnitude without addressing this risk would be counterproductive. We are working with Eskom to provide a solution to this problem, wherein Eskom will provide incentivised relief to municipalities whose debt is unaffordable.

“Recently Eskom announced that South Africa may soon find itself on stage 8 of loadsheddng in winter.”

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Elize Coetzee for SurgeZirc SA
Elize Coetzee for SurgeZirc SAhttps://new.surgezirc.co.za
Elize Coetzee, a seasoned journalist, is the driving force behind SurgeZirc SA’s world news and world politics coverage. With an unwavering commitment to truth, Elize delves into global affairs, providing live updates, in-depth investigations, and thought-provoking analysis. Whether it’s geopolitical tensions, international diplomacy, or breaking stories, Elize’s incisive reporting keeps readers informed and engaged.
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