South Africa: Government to Take Over Portion of Eskom's R400 Billion Debt

Government plans to embark on an Eskom debt relief programme that will see it take over a portion of the utility's R400 billion debt.

Finance Minister Enoch Godongwana outlined this plan on Wednesday while tabling the 2022 Medium Term Budget Policy Statement (MTBPS) before the National Assembly at the Cape Town City Hall.

The Minister said while the selection of the relevant debt instruments and the method of effecting the relief is still to be determined, the quantum is expected to be between one-third and two-thirds of Eskom's current debt.

"The debt takeover, once finalised, together with other reforms will ensure that Eskom is financially sustainable."

He said the programme would include the strict conditions required of Eskom and other stakeholders before and during the debt transfer.

"These conditions will address Eskom's structural challenges by managing its costs, addressing municipal and household arrears due to the utility, and providing greater clarity and transparency in tariff pricing."

In addition, Godongwana said, the conditions would be informed by a Treasury-led independent review of Eskom's operations, in particular the performance of its generation fleet.

In the MTBPS, Treasury said the debt relief programme was intended to ensure Eskom's long-term financial viability.

This would allow Eskom to implement planned capital investment and critical maintenance, and ensure that the company no longer relied on government bailouts.

"Debt relief alone will not solve Eskom's problems. It is, therefore, part of a comprehensive approach. While the utility has made progress in unbundling, which remains critical to its long-term sustainability, several underlying challenges must be addressed.

"The programme will include strict conditions required of Eskom and other stakeholders before and during the debt transfer. These conditions will address Eskom's structural challenges by managing its costs, addressing arrears due to the utility, and providing greater clarity and transparency in tariff pricing," Treasury said.

In addition, said the department, the conditions would be informed by an independent review of Eskom's operations.

"Further details of the programme, which will be finalised following consultations with all relevant stakeholders, will be announced in the 2023 Budget."

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