# Eskom fails to meet conditions for funding set by National Treasury

- Link: https://dearsouthafrica.co.za/2020/09/10/eskom-fails-to-meet-conditions-for-funding-set-by-national-treasury/
- Published: 2020-09-10T20:03:06+02:00
- Author: dearSA

### In 2019, National Treasury voted an amount of R59 billion in terms of a Special Appropriations Bill to assist Eskom pay interest and capital on its R488 billion debt.

![DearSA-Eskom-fail](https://cdn.dearsouthafrica.co.za/wp-content/uploads/2020/09/
20190931/DearSA-Eskom-fail.jpg "DearSA-Eskom-fail")

This allocation was based on Eskom meeting certain conditions based on operational,
financial, governance and restructuring compliances.

A recent presentation by National Treasury shows while Eskom succeeded in meeting
most of these conditions, it failed in certain critical areas. For example, it failed
to dispose of Eskom Finance Company by 31 March 2020, and has also failed to implement
the remuneration standards required as a condition of loan funding.

In other areas, there was partial compliance, such as information on the full duration
of loans taken out by Eskom, and the cost, timing and benefit plans relating to 
the completion of the new Kusile and Medupi power stations.

It has also failed to provide National Treasury with a full and detailed report 
on the defects in the new build programme.

“Despite Eskom not complying with two conditions, the information submitted and 
the weekly progress updates provided were sufficient to allow the disbursement of
the approved equity allocation of R 49 billion for 2019/20,” says a statement by
National Treasury.

The Department of Public Enterprises (DPE) was also non-compliant on two of four
conditions set by National Treasury:

 * It did not ensure the Eskom board was strengthened by 31 December 2019, and;
 * It failed to ensure that Eskom’s executive management performance agreement is
   linked to Key Performance Indicators as previously outlined by the minister of
   finance and in the shareholder compact.

“DPE has not submitted any progress report or correspondence to National Treasury
on the measures they are implementing in order to comply with the remaining unmet
conditions,” says National Treasury.

Subsequent to 31 March 2020, Eskom had submitted all outstanding information required
by Treasury. As of 27 August 2020, R6 billion of the R56 billion earmarked had been
disbursed to Eskom.

In a submission to the Standing Committee on Appropriations (SCOA), Eskom provided
details of government support since 2008: a total of R188 billion, of which R60 
billion was a loan and the balance equity.

For the financial year ending 31 March 2020, government made R49 billion available
to Eskom to ensure that its contractual interest and capital payments were timeously
made. This “recapitalisaton” came with conditions in terms of the Special Appropriation
Act: it could only be used to settle debt and interest payments and nothing else.
This R49 billion was supplemented by R36.2 billion in cash flows from Eskom operations,
with a further R32 billion raised in external loans.

For the year ending March 2020, Eskom paid R31.5 billion towards loan principal 
and R39.1 billion towards interest.

Without government support, Eskom would not have been able to meet its debt obligations
as they fell due.

“As Eskom is a critical state-owned enterprise, it is vital that the public are 
involved in crucial decisions that affect tariffs and the stability of the grid,”
says Hutchinson. “We will continue to keep a close eye on developments at Eskom,
and involve the public more – particularly where taxpayers are being asked for repeated
funding.”

### Nearly 15,000 South Africans reject a special appropriation of R59 billion for Eskom

[A Dear South Africa campaign](https://dearsouthafrica.co.za/special-appropriation-bill-2019/)
seeking public comment on the Special Appropriations Bill awarding an additional
R59 billion to Eskom returned a resounding “No” verdict.

Some 89.7% of the nearly 21,000 who commented on the Bill through the Dear South
Africa platforms were against the additional funding for Eskom, with just 3% in 
support. The balance of 7.3% did not fully support the funding appropriation.

It has also become apparent that Eskom has failed to meet certain key conditions
set by National Treasury for the disbursement of these funds.

A common theme among those opposing the additional funding was that Eskom was a 
bottomless pit of endless bailouts and tariff increases, with funds being diverted
away from social needs to a entity that had been proven to be corrupt. High salaries,
over-staffing, corruption and bonuses were seen as the drivers of the need for continual
taxpayer-funded bailouts.

Solutions suggested by commentators (among those voting for and against the additional
funding) are unbundling and privatisation; allowing consumers and other producers
to sell energy back into the grid; reclaiming stolen funds; reducing the head count
and salaries; collecting outstanding debts from municipalities and consumers, to
name a few.

The Dear South Africa campaign was agnostic as to the outcome, merely providing 
information for South Africans to make their voices heard. Dear South Africa is 
a non-profit which aims to encourage broader public participation in legislative
and policy issues as required under the Constitution. It makes no attempt to influence
the outcome of these campaigns.

A suggestion from those not fully supporting the additional R59 billion funding 
to Eskom was to limit it these new funds to core operational functions (not debt
repayment). There is also a desire to see National Treasury take a more hands-on
approach to the management of these funds. A common suggestion from those not fully
supporting the R59 billion bailout is to sell Eskom shares to the public as a means
of raising funds and allowing ordinary South Africans to participate in a restructured
enterprise.

Among those commenting in favour of the latest bailout, the solutions do not substantially
deviate from those opposed to it. Those in favour want to see privatisation and 
unbundling, recovery of municipal debt owed to Eskom, management by professionals
with proven competence, suspension of staff bonuses and fully transparent coal supply
contracts – and a re-examination of Independent Power Producer (IPP) contracts as
these are deemed excessively expensive.

Says Dear South Africa programme director Rob Hutchinson: “On both sides of the 
aisle in this debate, there appear to be no sacred cows as far as Eskom is concerned.
A high percentage of commentators say all contracts must be subject to brutal transparency
and the rush to solar and wind power appears to have fewer friends in light of the
high costs of purchasing energy which does not flow when the sun does not shine,
nor when the wind does not blow. That’s according to a large number of comments 
received.

“But the level of engagement on this campaign was high, which shows there is deep
concern about Eskom and what it means to the wellbeing of the country.”