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Eskom could collapse SA economy, warns Gigaba

Jan 18 2018 10:50
Yolandi Groenewald

Johannesburg - Finance Minister Malusi Gigaba warned on Thursday that if Eskom is not dealt with urgently, South Africa's whole economy could collapse by the time Team SA returns from the World Economic Forum (WEF) in Davos. 

Gigaba said at a pre-WEF breakfast meeting in Johannesburg that the fiscus simply does not have the funds to bail out Eskom. He hinted that a major shake-up is on the cards for the power utility in the next few days. 

"There would be no currency, and no economy for the country if Eskom went belly-up," Gigaba warned, adding that the crisis is extremely serious. 

The finance minister also said there are problems at Eskom's board and senior management, who simply don't seem to grasp the seriousness of the situation. 

Eskom is yet to publish its interim results, and could face severe penalties if it these are not made public before the end of the month, including lenders calling in loans. 

Deputy President Cyril Ramaphosa also admitted at the breakfast that the challenges around Eskom are huge, and said the state-owned enterprise is top of mind. Ramaphosa will chair the South African delegation in Davos.

"The minister of finance is seized with this on an hourly basis," he said in answer to a question on the seriousness of Eskom's financial woes. 

"Eskom is being addressed as we speak. We are coming up with solutions."

On Tuesday Gigaba said that Eskom is the biggest issue keeping him awake at night. He told reporters he would be meeting with lenders that afternoon. 

Eskom’s debt due to its new build programme is hefty. Treasury has issued R350bn of government guarantees to Eskom, of which R275bn has already been used. It needs to borrow about R60bn per year for the next four years to finish the new build programme, consisting out of Medupi and Kusile.

Gigaba said at the breakfast that the new urgent timeline did not come about as a result of the meeting with lenders, but because of new information which has come to light. 

He has drawn up a new timeline because of new facts which have come to his attention, which require the finance ministry to act with the utmost urgency.

At an International Monetary Fund meeting in October, Gigaba already said that lenders had urged Treasury to intervene.

"We have reached the stage where we can't be gradualist. We need to act now," he said.

Business Leadership SA CEO Bonang Mohale, meanwhile, also told reporters that Eskom is a huge concern. He said many BLSA members are banks that have lent money to Eskom. 

"We have had conversations with them, urging to give Eskom slack, that government is now acting," he said. 

Fin24 in November reported that the power utility’s poor governance had left it teetering on the edge of insolvency, with only R1.2bn of liquidity reserves expected to be in hand at the end of the November.

Its latest report to its shareholder representative, Public Enterprises Minister Lynne Brown, estimated that the utility would have a R5bn negative liquidity position by the end of this month. 

Poor corporate governance has alienated the facility and the reinstatement of controversial executive Matshela Koko has not boosted confidence. Koko was reportedly negotiating a golden handshake, Business Day reported on Thursday after charges against him had been dismissed and the executive reported for duty at Eskom last week.

His disciplinary hearing has been widely criticised as a sham.

A further two Eskom bosses, Anoj Singh and Abram Masango, are still to have their disciplinary hearings. Eskom spokesperson Khulu Phasiwe told Fin24 allegations against them are still being investigated before a decision to charge them will be made.

In August Eskom narrowly avoided a crisis when its lenders threatened to recall their loans. The power utility was only saved at the time by an intervention to suspend Singh. Phasiwe earlier told Fin24 that Eskom would not approach Treasury for a bailout.


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