Treasury wants Eskom to return to the capital markets, and soon
Dondo Mogajane says providing Eskom with R59bn over the next two years gives certainty to lenders and allows it to re-enter capital markets
The commitment by the government to provide Eskom with R59bn over the next two years will provide certainty to lenders and allow the cash-strapped utility to re-enter the capital markets, Treasury director-general Dondo Mogajane said on Wednesday.
“We want Eskom to urgently get back into the markets,” Mogajane said in an interview after a briefing to the National Council of Provinces (NCOP) select committee on appropriations on the appropriations bill.
He said with the R59bn allocation announced by finance minister Tito Mboweni in the National Assembly on Tuesday, lenders have been given the certainty that the government is committed to the funding of Eskom. This will establish it as a going concern and allow it to operate as a normal company.
Mogajane said there is no urgency for parliament to process the special appropriation bill tabled in parliament on Tuesday. The bill provides for the R59bn allocation, R26bn in 2019/2020 and R33bn in the following year as there is no urgency for funds for Eskom if it can enter the capital market.
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The bill will only be processed after MPs return from a three-week recess in August.
What will become available for Eskom by the signature of the appropriation bill by President Cyril Ramaphosa is the remaining R5.45bn of the R23bn allocated to Eskom in the February budget. Of this, R17.65bn was transferred without a formal appropriation, but as this is the maximum annual amount that can be transferred on an emergency basis under the Public Finance Management Act, the R5.45bn has to await the passage of the appropriations bill.
The R23bn is mainly intended to repay some of Eskom’s debt, which amounts to more than R440bn.
The National Assembly adopted the appropriations bill on Tuesday and the NCOP is due to adopt it on July 30. The NCOP’s select committee on appropriations adopted the bill on Tuesday.
Members of the select committee from both the DA and ANC are concerned about the lack of conditions imposed on the R59bn Eskom allocation, but Mogajane said in the interview that this will be catered for in the terms of reference of the chief restructuring officer (CRO), which will have the same status as conditions. The terms of reference are being finalised with the department of public enterprises.
The terms of reference will include establishing a detailed plan for the unbundling of Eskom into generation, transmission and distribution entities; the rationalisation of staff, especially at the over-heavy top management level; funding plans; and the restructuring of debt.
Mogajane also raised the prospect of the CRO deciding to dispose of Eskom Finance, which he believes will generate about R9bn to R10bn.
Restructuring debt could involve the government taking over some of it. The CRO will have to come up with options to discuss with bondholders. Said Mogajane, “In two years, we need to see some serious moves.”