South Africa’s Finance Minister Tito Mboweni, wearing a fiery red tie and full of energy was at pains during a press conference with media , ahead of his maiden Budget, to say that Treasury is not giving troubled-state owned entity Eskom a bailout or taking on its debt but rather funding it to the tune of R69bn over the next three years or R23bn a year. This is to financially support it during its reconfiguration.
In the State of the Nation Address, President Cyril Ramaphosa announced that Eskom will be reconfigured into three independent components: generation, transmission and distribution.
Mboweni warned that the fiscal support to Eskom is conditional.
In his Budget speech he states that “pouring money directly into Eskom in its current form is like pouring water into a sieve.
“I want to make it clear: the national government is not taking on Eskom’s debt. Eskom took on the debt. It must ultimately repay it. We are setting aside R23 billion a year to financially support Eskom during its reconfiguration.
“The fiscal support is conditional on an independent Chief Reorganisation Officer (CRO) being jointly appointed by the Ministers of Finance and Public Enterprises with the explicit mandate of delivering on the recommendations of the Presidential Task Team. We will make announcements in this regard in the coming weeks.”
The minister described this process as essentially placing, what many see as the biggest risk to South Africa under curatorship.
“We are not just loaning Eskom money, we want to look after every rand and cent we give them” he said.
Staunchly the minister warned other state owned enterprises seeking funding from Treasury that the days of bailouts are over. If they want funding we will appoint a CRO and essentially place them under curatorship. This will make them reluctant to come to Treasury, he said.
Labouring the point in his speech he said “We must tighten the guarantee rules. If a state-owned enterprise applies for a government guarantee for operational purposes, it will be required to appoint a CRO in concurrence with the National Treasury and its bondholders. The CRO will undertake a full operational and financial review. When banks need state support, we appoint a curator. When provincial and municipal finances are in disarray, government can take over the running of the administration. These rules should also apply to all SOEs.
“Cabinet is considering a proposal to end the issuing of guarantees for operational purposes. Expiration dates on guarantees will also be strictly enforced. As the President announced, strategic equity partners will be found where possible. “
The minister in his speech also said the time has come for the country to ask “do we still need these enterprises? If we do, can we manage them better? If we don’t need them, what should we do?”
Asked why he posed this question and what his answer would be, he said he wanted to agitate a conversation.
“We need to move with the times. We need to establish what our priorities are. Should R10bn be put in a loss-making airline or the taxi and railway industry?
“Who are we serving by the decisions we take?”
He added that we need a forum to discuss these questions, in Eskom’s case with the trade unions, bondholders, management and the relevant ministers.
“The status quo is not working, we have to cross the Rubicon on the other side of Rome.”
