Tell us how the R59bn bailout will make Eskom sustainable

The Organisation Undoing Tax Abuse (OUTA) is not opposing the bailout but wants South Africa to get value for money from it.

“We would like clarity on how Eskom will be operationally sustainable as a result of the R59bn bailout,” Ronald Chauke, OUTA’s energy advisor, told Parliament on Wednesday.

Chauke was making a submission to the joint meeting of Parliament’s Standing and Select Committees on Appropriations. The committees are discussing the Special Appropriation Bill [B10-2019] which provides for an Eskom bailout of R59 billion, to be paid as R26bn in 2019/20 and R33bn in 2020/21. This bailout is in addition to the R23bn a year for three years, which was included in Budget 2019.

OUTA called for the bailout to be spent primarily on reducing the Eskom debt, which had reached R440bn by March 2019 with R53bn due to be repaid this year.

The Bill allows the Minister of Finance to impose certain unspecified conditions on Eskom as part of the bailout, which include granting Treasury the power to stop payment if conditions are not met. However, OUTA wants these conditions to be tightened up, made public and for regular reports to be made to Parliament. Conditions should include linking the provision of the bailout to the implementation of Eskom’s turnaround strategy.

OUTA raised concern over Eskom’s increase in operational costs, with primary energy costs up 17% year-on-year (from R85.2bn in 2017/18 to R99.5bn in 2018/19) and personnel costs up 13% (from R29.5bn in 2017/18 to R33.3bn in 2018/19). Eskom made a loss of R20.7bn in 2018/19.

Electricity prices have increased more than four times inflation over the last decade. The inflation over the last decade was 58.5%, while the increase in the average price of electricity charged by Eskom was 261%. Electricity is an enabler promoting access to improved health, education, security and economic independence, but these electricity price increases create social hardship.

“Such increases in such an unequal society with many people without an income contribute to deepening of poverty,” says Chauke.

OUTA queried the effectiveness of the Inter-Ministerial Task Team in resolving the municipal and Soweto debt of R38bn owed to Eskom, which keeps rising every year. 

A copy of OUTA's submission is here.