South African president Cyril Ramaphosa said the government will soon give the embattled state power utility “a significant portion” of the R230 billion ($16 billion) it needs over the next decade to remain solvent.
The announcement of the support for Eskom Holdings SOC Ltd comes just four months after the National Treasury gave it a three-year, R69 billion bailout and will place severe pressure on the government’s already stretched finances.
Letting Eskom go insolvent just wasn’t an option – it supplies about 95% of the nation’s electricity and would cripple the economy if it ceased operating.
“The utility’s financial position remains of grave concern,” Ramaphosa said in his state-of-the-nation address to parliament in Cape Town on Thursday.
“With the current committed funding from the government outlined in the 2019 budget, Eskom has sufficient cash to meet its obligations until October 2019.
“For Eskom to default on its loans would cause a cross-default on its remaining debt and would have a huge impact on an already constrained fiscus.”
Eskom has been hamstrung by under-investment in new plants and years of management upheaval that left it with more than $30 billion in debt, insufficient income to cover its costs and a fleet of old and poorly maintained power stations that struggle to produce enough power to meet demand.
The economy contracted an annualized 3.2% in the first quarter, largely due to Eskom instituting a series of rolling blackouts to prevent a collapse of the national grid.
Finance minister Tito Mboweni will give details of the additional support, which will be allocated through a special appropriations bill, in due course, Ramaphosa said.