Pretoria - National Treasury is concerned about the negative impact of electricity constraints on growth and potential growth, says Finance Minister Nhlanhla Nene.
“We are concerned about the negative impact the electricity constraint is having on growth and potential growth. Ensuring that Eskom returns to full financial and operational sustainability is a top priority of government,” said the Minister.
The Minister was speaking to the Foreign Correspondents Association in Johannesburg on Monday.
The Minister said that government had invested significant time and resources in understanding the power parastatal’s funding requirements, the options available for closing any funding gaps and what the path back to full sustainability looks like.
Several operational challenges have contributed to the financial challenges that Eskom is experiencing. “Inadequate maintenance of the power plants and distribution networks is resulting in deteriorating and unreliable performance which is in turn leading to higher maintenance costs,” said Minister Nene.
During the Medium Term Budget Policy Statement (MTBPS) Treasury announced a broad package for Eskom that includes a capital injection of R23 billion, governance improvements, operational cost containment and additional borrowing and support for required tariff increases. Through the disposal of non-core state assets, the fiscal allocation of R23 billion will be paid in three instalments with the first transfer to be made in June.
“The government support package is more than the R23 billion capital injection that many have focussed on. The package attempts to balance a range of interventions in recognition of the fact that there are many different stakeholders that play a role in returning the organisation to full health,” explained the Minister.
He said that it needs to be recognised that the key ingredients to addressing Eskom’s funding challenges lie in interventions to contain costs with the key elements for the utility being to fix their costs and revenues to fair and sustainable levels.
Meanwhile, National Treasury has also taken steps to persuade municipalities to conclude payment plans and repay Eskom debts. This was done by withholding equitable share payments to municipalities that have outstanding debts to Eskom and who failed to acknowledge this debt.
“Applications for tariff adjustments have been submitted to the energy regulator. Free Basic Electricity grants were increased to soften the impact of higher tariffs on low-income households,” said the Minister.
Public Sector Institutions
The Minister said that many public institutions are in a strong financial position contributing to fiscal sustainability and public welfare but that in recent years the financial and operational performance of several state-owned companies and development finance institutions has weakened.
“Inadequate policy frameworks, regulatory uncertainty, poor operational performance and governance failures often lie behind the deterioration in financial positions,” said the Minister.
Given current fiscal constraints government will address the funding needs of public institutions in a manner that does not increase the budget deficit with the sources of such funds including the disposal of non-strategic assets like property.
The Minister said that in aggregate South Africa’s public sector institutions are solvent and many are performing well. “However poor-performing and inefficient entities are significant risks to public finances.”
Government is meanwhile working with these institutions to develop sustainable financial frameworks supported by turnaround plans. – SAnews.gov.za
