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SA budget brings little good news for Eskom
SOUTH AFRICA
SOUTH Africa’s 2020 budget offers little that is new or innovative for Eskom.
The government’s plans to give Eskom ZAR112bn ($7.3bn) over the next three years remained unchanged, while Pretoria is not going to provide any specific debt relief until Eskom management can show progress on the current Reform Road Map.
Indeed, Finance Minister Tito Mboweni admitted that electricity was now the single most important factor driving economic growth, or the lack of it.
Presented by Mboweni on February 27, the budget cut by almost 50% the government’s fore- cast for economic growth to 0.9%, while inflation is put at 4.5%
The government had previously projected economic growth at 1.7% for 2020, but the econ- omy has been hit by revenue shortfalls, debt and persistent electricity shortages.
Meanwhile, Mboweni did express support for a trade union proposal for the state Public Investment Corporation (PIC) and other state institutions to take on ZARR254bn of Eskom’s ZAR450bn debt.
The PIC manages the Government Employ- ees Pension Fund (GEPF) and would effectively be investing the savings of million of workers into Eskom. Mboweni also suggested that private sector pension funds should shoulder some of Eskom’s debt pile.
This proposal is supported by the unions and the ruling ANC party, but many pension fund
members have opposed investing their savings into an economically risky company such as Eskom.
Looking ahead, the budget’s outlook for the economy is also dismal.
“Over the next three years, we expect growth to average just over 1%,” Moboweni said, adding “a stable supply of electricity will be our number one task.”
The government’s ability to deal with Eskom will be hampered by an anticipated shortfall in revenue collection in 2020, raising ZAR63.3bn ($4.1bn) less than projected.
This year’s budget deficit is forecast at 6.8% of GDP, the widest in 25 years, and the treasury aims to reduce spending in a number of areas, for example by cutting the public wage bill by ZAR160.2bn ($10.5bn) over three years.
Yet Moboweni expressed hope that the econ- omy could recover over the next 18 months. The government has recently reduced interest rates, and intends to implement its reforms of Eskom and the wider regulatory framework.
The country has suffered from rolling power cuts, known as load-shedding, in recent months, despite commitments by Eskom and the gov- ernment in October 2019 that power cuts would stop.
Eskom has had to close some generating units for maintenance, and alternative hydro and gas units have not been able to fill the gap, resulting in restrictions being announced on an almost a daily basis.™
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w w w. N E W S B A S E . c o m Week 08 27•February•2020