The government has absorbed a massive chunk of Eskom’s R423bn debt, providing the ailing power utility with debt relief of R254bn in the next three years.

This was one of the major announcements made by finance minister Enoch Godongwana during the tabling of the 2023/2024 budget in parliament on Wednesday.

Godongwana told MPs strict conditions have been attached to the latest financial assistance to Eskom, and this was being done to help the state-owned enterprise to improve its balance sheet while restructuring and investing more in maintenance to support security of electricity supply.

“This consists of two components. One is R184bn. This represents Eskom’s full debt settlement requirement in three tranches over the medium term,” he told MPs.

“Second is a direct takeover of up to R70bn of Eskom’s loan portfolio in 2025/26.

“Because of the structure of the debt relief, Eskom will not need further borrowing during the relief period.

“Government will finance the arrangement through the R66bn baseline provision announced in the 2019 budget, and R118bn in additional borrowing over the next three years.”

The latest debt relief for Eskom comes as the utility implements debilitating stage 6 load-shedding due to constrained energy generation, which is proving detrimental to businesses and other economic activities.

Godongwana’s budget documents also show that since the 2008/09 financial year, when load-shedding first become a phenomenon, “government has provided the utility with R263bn in bailouts”.

“These allocations have failed to stem the collapse of Eskom’s balance sheet and operations. The utility imposes an enormous drain on the economy and its debt stands at an unsustainable R423bn.”

Godongwana also announced an international consortium with “extensive experience” in running coal-fired stations has been appointed to review all Eskom’s coal-fired power stations and how they could be improved.

He said the work was expected to be “concluded by mid-2023”.

As some of the strict conditions attached to its financial rescue, Eskom would be “required to implement the operational recommendations emanating from this independent assessment”.

“This will include a determination of which plants can be resuscitated to original equipment manufacturers’ standards, following which Eskom must concession all these power stations with clear targets for the electricity availability factor and operations.”

The power utility would also be expected to prioritise capital expenditure in energy transmission and distribution in the debt relief period.

Godongwana said other measures to tackle Eskom’s debt levels would include providing incentives to municipalities whose debt to Eskom was unaffordable.

Municipalities owed Eskom more than R56bn by the end of December 2022 and it was rising.

“To avoid a repeat of debt build-up over time, the relief will attach measures, including the installation of prepaid meters to correct the underlying behaviour of nonpayment and operational practices in these municipalities,” said Godongwana.

“Eskom’s long-term financial viability depends on its customers paying their dues. National Treasury will publish details for accessing the debt relief in a circular in March 2023. Implementation will start from April 1.

“More generally, the culture of nonpayment, not only by municipalities but by all organs of state and individual household customers, is concerning. Such behaviour undermines and cripples our institutions and makes it impossible for them to deliver services. To change this, National Treasury is exploring ways to encourage all to improve their behaviour and do the right thing.”

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