Eskom's R60bn helps raise spending

Cape Town - The medium term spending plans announced by Finance Minister Trevor Manuel in the National Assembly on Tuesday are increased by R170.8bn over the next three years. Of that, R60bn will go to Eskom to fund its new generating plant.

Ten billion rand will go to Eskom this year, and R50bn over the next two years.

With Eskom excluded, the remaining R120bn increase in spending in the medium term period represents an annual hike of 6%.

The funding to Eskom will go as a loan, however, so interest will have to be paid on it, and in thirty years' time it will have to be paid back.

According to Lesetja Kganyago, the Treasury director general speaking at a media briefing in parliament on Tuesday, the coupon on the loan would be 6.25%, and would be based on the R209 bond. No interest would be paid for the first ten years of the loan, but twenty years later a "bullet payment" would have to be made to pay the entire sum back to the taxpayers.

Manuel told MPs that the electricity outages experienced in the early part of the year signalled capacity constraints in several areas of infrastructure, and he said that to break these constraints "we must invest more."

"Financing these investments will be challenging," he said. "Government will support our state-owned enterprises through providing selective guarantees on their borrowing and through increasing the capacity of our development finance institutions to contribute to funding major infrastructure projects."

But the minister said that it was essential to price utility services "appropriately" so that we encouraged more efficient use of these inputs and to generate the resources to fund greater expansion in capacity.

"We must also create a more amenable environment for the private sector to invest in economic and social infrastructure," he said.

- I-Net Bridge