• Finance Minister Enoch Godongwana announced that government will take over a third to two thirds of Eskom’s R400 billion debt.
• The hope is that this will allow Eskom to invest in plant performance and stop relying on government bailouts.
• The path forward will be announced at the 2023 budget speech.

This afternoon Finance Minister Enoch Godongwana tabled the 2022 Medium-Term Budget Policy Statement [pdf] in Parliament.

Among the many highlights of Godongwana’s speech was mention of Eskom and how government intends to right that ship. As it turns out, government intends to take on a significant portion of Eskom’s debt.

“To ensure Eskom’s long-term financial viability, government will take over a significant portion of the utility’s R400 billion debt,” the minister said on Wednesday afternoon.

“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,” Godongwana added.

The hope here is that by taking on this portion of Eskom’s debt, the utility will be able to use the money it has available to focus on plant performance and capital investment.

Importantly, Godongwana hopes this will stop Eskom’s reliance on government bailouts.

This agreement will come with “strict conditions” that Eskom and other stakeholders will need to meet both before and after the debt transfer. These conditions will tackle several aspects of Eskom’s business including managing its costs, addressing arrears from municipal and household customers and providing greater clarity and transparency on tariff pricing.

This isn’t just for Eskom though as Godongwana has said that assistance to State Owned Enterprises will now hinge on pre- and post-conditions being met.

“Funding to SOEs will now come with strict pre- and post-conditions. Pre-conditions mean that SOEs will need to comply with these conditions before they receive government support, not after.

Non-compliance to conditions, means no funding,” said Godongwana.

The timeline for this debt transfer is also encouraging with Godongwana saying details of the programme will be announced at the 2023 budget speech.

Eskom is currently implementing Stage 3 loadshedding from 05:00 to 16:00 each day and Stage 4 loadshedding between 16:00 and 05:00.

Here’s hoping this strategy from Godongwana pays off.