Eskom remains in deep financial trouble, a new report tabled in parliament by national treasury has shown.
Treasury tabled the third-quarter government expenditure report to parliament’s appropriation committee on Wednesday, revealing continuing financial distress at Eskom and its ongoing need for taxpayer-funded bailouts to avoid bankruptcy.
Cash generated from operating activities at the utility is insufficient to cover the cost of servicing debt (both interest and capital), prompting the need for further government support.
Eskom’s profitability is being hampered by poor long-term financial sustainability arising from what treasury suggested were tariffs that were too low, poor generating plant performance, escalating municipal debt owed to it and high debt-servicing costs.
Eskom’s unaudited performance for the third quarter of 2023/2024 showed a loss after tax of R7.5-billion. Arrears debt remains a major challenge for the entity, with total invoiced municipal arrears debt increasing to R75.4-billion by the end of last year.
Also, sales volumes were 7.5TWh (5.1% lower than budget) and deteriorated by 3.5% when compared to the same period in the previous financial year, while primary energy costs have increased year on year by R12.4-billion.
In his February 2023 budget speech, finance minister Enoch Godongwana announced a debt relief package for Eskom in terms of which the utility would receive R254-billion over three years. By 31 December 2023, treasury had already handed over R44-billion in the form of loans, with R16-billion being converted into equity.
‘Death spiral’
Democratic Alliance MP Ashor Sarupen said in a statement on the national treasury report, which included an update on the financial performance of other state-owned enterprises: “The alarming financial distress exhibited by multiple SOEs, as highlighted in the third-quarter government expenditure report, demonstrates that the bailout strategy of the ANC has failed. These ongoing bailouts now pose a threat to long-term fiscal sustainability and the ability of the state to deliver services and deliver on infrastructure needs.
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“These bailouts divert funds that should be used to supplement hard-pressed services such as healthcare, education and policing. The government needs to accept that state-owned enterprises are now in a death spiral due to the long-term impact of mismanagement and cadre deployment. The endless bailout strategy has failed. Should the state insist on continuing down this path, it will result in economic instability, reduced investor confidence and hindered overall growth,” he said. – © 2024 NewsCentral Media
