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R17 billion Eskom bailout proof that things are much worse

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Editor: The title of this letter probably qualifies for the title of; “Understatement of the Year!”

Dear MyPE

The Democratic Alliance (DA) notes that the Minister of Finance, Tito Mboweni, as is required by section 16 (4) (a) of the Public Finance and Management Act (PFMA), tabled in Parliament today a report which details a bailout to Eskom to the tune of R17.652 billion. The first R5 billion was paid to Eskom on 2 April 2019. This report was snuck into the ATC without much fanfare to hide the true extent of this crisis.

Minister Mboweni indicates in his report that the amount was limited to R17.652 billion by Section 16 (2) of the PFMA which limits such “emergency” funding to a maximum of 2 percent of the appropriated national budget. This clearly indicates that the cash crisis at Eskom is far worse than the R 17.652 billion and that the amount would have been far greater had this limitation contained in Section 16 (2) not existed or was higher.

The Fifth Parliament remains in operation and it is the view of the DA that there is an urgent need for the Parliamentary committees of Finance, Appropriations and Public Enterprises to hold a joint meeting to be fully briefed on the financial crisis facing Eskom, and to provide a report with recommendations to Parliament.

I have written to Yunus Carrim, Chair of the Standing Committee on Finance, to request that he convene a joint committee meeting with the Standing Committee on Appropriations and the Portfolio Committee of Public Enterprises in order to receive a full briefing from Eskom and Tito Mboweni, Minister of Finance, on the liquidity crisis facing Eskom.

It has long been public knowledge that Eskom is bankrupt. The entity had run out of cash to keep its operations going a long time ago and has been fighting to keep providing electricity desperately needed to keep economic activity going and to avoid a recession. It is extraordinary that this crisis was so obvious that even Minister Mboweni was forced to include a current year bailout for Eskom of R23 billion but failed to introduce a special appropriation bill to ensure the funds were available for Eskom to keep the lights on.

In today’s report to Parliament, Minister Mboweni states that “ … by the end of March 2019, it became evident that Eskom was experiencing difficulties in raising the required funding as well as drawing down on existing facilities.” Two days later Eskom was paid a bailout of R5 billion.

It is extraordinary that in a letter dated 19 March 2019, and received from the Minister on 17 April 2019, made no mention of the pending cash crisis. Yet in his section 16 of the PFMA report to Parliament dated the 16 April 2019, Minister Mboweni states that “[i]n its current form, South Africa’s state-owned power utility is not financially sustainable, nor can it meet the country’s electricity needs.”

This surely did not come as a surprise to Minister Mboweni. Surely there was adequate indication that a special appropriation bill was required to be passed by Parliament on an urgent basis before the end of the first quarter of the 2019 Parliamentary session. If this did come as a surprise to the Minister in the same way that so many of ANC failures have come as a “surprise” to Cyril Ramaphosa, President of South Africa, then there would seem to be a breakdown of communications between the Minister of Finance, Eskom and Public Enterprises Minister Pravin Gordhan, or perhaps a deliberate attempt on the part of Eskom to conceal the extent of the crisis. What is evident is that the ANC government will plunge the country into debt, just to keep the lights on for the next 20 days until Election Day.

Regards

Alf Lees MP
DA Shadow Minister of Finance

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This author is a 'catch-all' for occasional articles and letters written to MyPE. The Author of each article can be found in the signature at the bottom of each individual article.