Chinese loans to Eskom, Transnet granted without conditions

Wednesday, September 12, 2018

President Cyril Ramaphosa says the recent Chinese loans that were given to state-owned entities Eskom and Transnet come with no conditions.

Responding to oral questions at the National Council of Provinces (NCOP) on Tuesday, the President also said that it is not unusual for state owned entities to raise funding in the market for capital investment or operating costs.

He said about the Eskom loan: “There are no specific conditions for this loan.
“Eskom has indicated it will not be able to make the loan agreement public since it contains information that may put Eskom at a disadvantage when negotiating in the market.
“The China Development Bank facility is more competitive than the global market rate.
“The loan is government guaranteed under the existing Government Guarantee Framework Agreement”.

Cathleen Labuschagne, a DA whip in the NCOP, had asked the President if any conditions were attached to the loans from the Chinese Development Bank, and what they would be spent on and also asked for a breakdown of the payback agreements for both the credit facilities.

The President said Eskom recently entered into a loan agreement with the China Development Bank for $2.5 billion – or R33 billion – which will be used to fund the construction of Kusile Power Station.
He said this is the third tranche of a $5 billion facility that was approved by the Ministers of Finance and Public Enterprises in 2015.
“The facility has a grace period of five years and thereafter the principal amount is repayable by Eskom in 20 instalments over a period of 10 years,” he said.

He said, meanwhile, that Transnet recently secured a R4 billion loan from the Industrial and Commercial Bank of China, not from the China Development Bank.
He said the loan came with terms and conditions that are standard for this type of loan.
“The funds will be used to finance the general operating activities and certain capital expenditure of Transnet.
“Transnet will be responsible for paying the interest and repaying the capital.
“The facility is a five-year, rand denominated, quarterly amortising loan, at a floating and competitive interest rate,” he said. –