'We can't be Father Christmas' to ailing Eskom – Treasury DG | Fin24

'We can't be Father Christmas' to ailing Eskom – Treasury DG

Aug 28 2019 13:25
Lameez Omarjee, Fin24

Treasury cannot act like "Father Christmas" by continuously pumping money into Eskom as funds stem from tax revenues, Treasury Director General Dondo Mogajane told a Parliamentary briefing on Wednesday.

Mogajane was updating the Standing Committee on Appropriations on a special bill to allocate the debt-laden power utility an additional R59bn in funds over the next two years to help it meet its financial obligations.

Finance Minister Tito Mboweni tabled the Special Appropriations Bill before the National Assembly in July. The R59bn in funds is over and above the R69bn that Treasury allocated to Eskom for the next three financial years, as announced by the minister in his maiden Budget in February. 

Mboweni has said the R59bn in additional funding comes with strict conditions, as it has implications for the fiscus. If Eskom does not meet the conditions, Treasury will stop the funding, Mboweni previously told members of Parliament.

Mogajane told the committee on Wednesday that Treasury is currently finalising the conditions to be included in the bill. Some of the measures being considered include an obligation that the funding be strictly used for debt and interest payments, and getting Eskom leadership to give daily reports to both Treasury and the Department of Public Enterprises on its liquidity position.

He stressed that Treasury cannot act like "Father Christmas", adding that there should be room to consider salary cuts for executives. 

He said that while it may seem inappropriate for him to suggest a pay cut of 10%, the idea should be up for discussion. "If we can't maintain the number of employees at Eskom, and if everyone wants a slice of the cake, then they must each get a smaller slice so we can all enjoy," he said.

Mogajane added he is not necessarily talking about low to middle level workers, but executives. "If an executive is earning R2m today, can they earn R1.8m tomorrow?" he put to the committee.

He told the committee that government must ensure energy security at all costs given the importance of Eskom's role to the economy and its impact on the country's sovereign debt rating.

"If Eskom has to collapse – it will be detrimental to South Africa and Africa as a whole," he said.

If short term liquidity issues at Eskom impacted its debt repayments, this could result in a possible call on government's guarantee, he added.

Securing funding

The additional R59bn that will be appropriated to Eskom is based on the power utility's ability to execute its own funding plan, according to a Treasury report. Eskom is meant to raise R46bn in the 2019/20 financial year and has secured 58% of that amount so far.

Treasury has warned that the failure by Eskom to execute its funding plan may result in the power utility experiencing liquidity shortfalls by March 31, 2020. The power utility will then need additional funding, on top of the R59bn to be provided from the Special Appropriation Bill.

Eskom's debt has been escalating at a rate of 10% per year, having breached R400bn in 2018. It is now at a level of R446bn, Mogajane told the committee.

Apart from having appointed Chief Restructuring Officer Freeman Nomvalo to develop a financial turnaround for Eskom, government is also working on a Special Paper on Eskom to outline a roadmap to aid its transformation. The paper will be released in September 2019, he said. 



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