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Eskom, which supplies about 95% of South Africa’s power and is reliant on government bailouts to remain solvent, is set to announce its second consecutive multi-billion rand annual loss on Tuesday. The big question is: How many billions?
The state-owned utility forecast in January that its loss would widen to about R20bn in the year through March, from R2.3bn the year before. But Anton Eberhard, who sits on a government team that’s advising on a rescue plan for Eskom, told a conference in Lisbon last month the shortfall would be at least R25bn.
Either way, the loss would be a record for a state company, eclipsing the R14.6bn state oil and gas company PetroSA burnt through in the year through March 2015 after a massive asset write-down. The utility’s precarious financial state has now become a national problem.
Finance Minister Tito Mboweni recently announced that Eskom would get a further R59bn over two years. Eskom's debt is approaching R500bn. In April this year, Mboweni invoked section 16 of the Public Finance Management Act, which allowed him to authorise R17.65bn to Eskom to help it meet its debt obligations. The R17.65bn is part of the R23bn allocated to Eskom in the national budget earlier this year.
Eskom has been struggling to produce enough power to meet demand from its aging coal-fired plants, and two new ones currently under construction are running years behind schedule and way over budget. The utility isn’t generating enough cash to service both its interest and debt repayments, despite having secured tariff increases of more than 500% since 2007, according to Eberhard, a professor at the University of Cape Town.
The utility may also get a new chief restructuring officer, who will help reorganise its debt and oversee the process of splitting it into generation, transmission and distribution units.
Eskom revealed in May that it owed R440bn at the end of March, R273bn of which was government-guaranteed.
Public Enterprises Minister Pravin Gordhan announced on Monday that Jabu Mabuza would serve as the interim executive chair for Eskom and acting CEO of Eskom Holdings. The post became vacant following the resignation of Phakamani Hadebe, who leaves the utility on July 31.
