Johannesburg - Power utility Eskom will halve its R40bn debt shortfall - which includes the proceeds of three years of proposed tariff increases - if talks with the World Bank for a R23bn ($3bn) loan agreement unveiled on Tuesday are successful.
Speaking to news agency I-Net Bridge, director-general of the National Treasury Lesetja Kganyago said "alternatives [were] taking place" in respect of Eskom's financing plans. It was easier for Eskom to approach the World Bank than government, he said.
Lesetja was responding to a question on whether government was looking to alternatives to raise money rather than saturating the local capital market.
Interestingly, Finance Minister Pravin Gordhan did not mention plans to finance Eskom's R40bn shortfall in his Medium-Term Budget Policy Statement released to parliament on Tuesday.
Gordhan conceded that this meant the shortfall would have to be recovered from the staggering price increases demanded by the state electricity provider. "There is no new money," he said.
Eskom stunned South African consumers earlier in October when plans for three price hikes over the next three years were leaked.
Eskom made an application to the National Energy Regulator of South Africa (Nersa) to approve the increases, the first of which will become effective in April. Nersa has already permitted Eskom to increase this year's price by 31.3%.
Eskom said the hike would be an average nominal 42.8% or 45% over three years when purchases from some independent power producers were included.
Kganyago said a number of alternatives to tapping local markets had been considered ahead of opening talks between Eskom and the World Bank, including export credit agencies. Eskom has a facility for $2bn with the African Development Bank, said Kganyago.
Concern for consumers
Gordhan said the treasury was deeply concerned about the impact of the Eskom price hikes on households and businesses, and would continue to look for alternative ways to find more funding for the power utility and reduce pressure on consumers.
The adjusted MTBPS sees public enterprises receiving a funding boost to pay the debts of national carrier SA Airways (SAA), as well as the penalty incurred by arms manufacturer Denel in its controversial Airbus contract.
The department converted a guaranteed loan of R1.56bn to SAA into equity to reduce the struggling national carrier's debt, which means it spent about 85% more in the first half of this year compared to last year.
SAA was given the loan in February when former finance minister Trevor Manuel tabled his last budget.
Gordhan allocated an additional R191.9m to state-owned Denel Saab Aerostructures for a penalty relating to a contract under which the South African military would acquire eight A400M Airbus heavy-lifter freight planes.
It stems from Denel's failure to meet performance targets as part of the deal.
A massive joint European manufacturing project to launch the A400M - the world's biggest military aircraft - has been dogged by problems, with major partners like Britain threatening to pull out because of delays and soaring costs.
Armscor CEO Sipho Thomo told parliament in October that buying eight of the aircraft would cost South Africa R47bn, compared to the R17bn estimated in 2005 when the deal was inked.
Gordhan said the provision to cover the penalty was no indication of any firm commitment by government to go ahead with the deal.
A decision would be taken by cabinet in the next few weeks, he added.
The new finance minister said there was no policy decision to privatise troubled state-owned enterprises. Public Enterprises Minister Barbara Hogan had hinted at this earlier in the year, which earned her a stinging rebuke.
"The p-word has not been used," he said.
- Fin24.com