Tito Mboweni bemoans ‘madness’ of Eskom’s debt

SA’s embattled state power utility Eskom must prioritise collecting the money it is owed by municipalities as a first step toward becoming financially sustainable, says finance minister Tito Mboweni.

In September last year, Eskom reported that municipalities owed it R17bn in arrears for power purchases, a 25% increase from six months earlier. In the February budget, the National Treasury allocated Eskom R69bn over the next three years to help to keep it afloat.

Mboweni described as “madness” that the government gives municipalities taxpayer money through grants, and then has to assist the power utility because some of those councils don’t pay for the electricity that they have sold.

“It is not rocket science and it is quite simple,” Mboweni said in an interview in Cape Town on Monday. The arrears “must be collected”, he said.

Eskom hasn’t been selling enough power to cover its operating costs and interest payments. It has been forced to implement rotating blackouts over the past few years to prevent a collapse of the national grid as its fleet of ageing and poorly maintained plants struggled to keep pace with demand. President Cyril Ramaphosa, who secured a five-year term when the governing ANC won the recent national elections, announced plans earlier this year to split the company into three units to make it easier to manage.

Operational fix

The company’s debt has increased to almost R500bn, according to data compiled by Bloomberg from public records, including bonds and issued loans.

Mboweni said he has no knowledge of a proposal to set up a special-purpose vehicle that would take over a large part of Eskom’s debt and raise concessional financing on accelerated climate-change commitments. Business Day reported earlier on Monday that the option was being considered as part of the plans to restructure the utility.

“I have not received any information about that,” Mboweni said. “The first issue that has to be sorted out with Eskom is operational. It’s not about its finances.”

Mboweni is likely to hold on to his job for at least another year when Ramaphosa names his new cabinet, according to two people familiar with the selection process, who asked to remain anonymous because they aren’t authorised to comment.

Bloomberg