By Tom Head for The South African
South Africa could be set for another round of drama from Eskom, as the ailing power utility has reportedly failed to receive R7 billion in loan payments initially set to come from the Chinese Development Bank (CDB).
That’s according to City Press, who have reported that the creditors do not trust their promises over proposed maintenance work. It would be the second time in just over two weeks that one of Eskom’s promised loans failed to materialise after the Brics New Development Bank also did not part with their billions.
Why haven’t Eskom received the loan?
On Easter Friday, Finance Minister Tito Mboweni was forced to grant the power giants an emergency bailout in order to meet salary demands and diesel costs. It’s reported that the CDB has taken note of their actions, and fear that this particular instalment of their cash will be used to plug holes, rather than go towards maintenance.
The loan in question will come to R33 billion in total, and it has been earmarked for the development of the Medupi and Kusile power plants. The new builds are yet to get up to full speed, and they’re struggling to produce the amount of electricity needed to keep South Africa illuminated as more “old units” come to the end of their lifespans.
Load shedding fears resurface
Eskom is very much living hand-to-mouth at the moment. In fact, some of their biggest critics believe this will be the last week where the lights stay on: Natasha Mazzone of the DA has accused the firm of diverting funds from long-term projects in order to keep voters happy before the general election this Wednesday.
Public Enterprises Minister Pravin Gordhan has also refused to rule out the return of load shedding this winter, despite unveiling plans to nip it in the bud at the beginning of April. We’ve already seen how one defaulted payment can spark a financial crisis, so a second one within two weeks is a terrible omen for the company… and its consumers.
By Alexander Winning and Macdonald Dzirutwe for IOL
South Africa turned down a request from its southern African neighbour Zimbabwe for a $1.2 billion (about R16.6 billion) loan in December, a spokesman for the finance ministry said on Monday.
“South Africa doesn’t have that kind of money,” National Treasury spokesman Jabulani Sikhakhane said.
Zimbabwean officials were not immediately available for comment.
Zimbabwe was hit by deadly anti-government protests last week after a hike in fuel prices stoked anger over an economic crisis.
Police say three people died during demonstrations that turned violent in the capital Harare and second city Bulawayo. But human rights groups say evidence suggests at least a dozen were killed.
Zimbabwean President Emmerson Mnangagwa said on Sunday that he would return home from a European tour and skip the World Economic Forum in Davos to address the crisis.
Eskom will sign a $1.5bn (R19.78bn) loan agreement with China Development Bank on Thursday, as the state-owned utility powers ahead with its funding requirements for 2017.
Last week, new acting Eskom CEO Johnny Dladla revealed that Eskom had secured 77% of its funding requirements for the 2017/18 financial year.
He said that for the 2016/17 financial year, Eskom increased its borrowings by over R60bn.
“We remain resolute that we will fully execute the required funding for the year, albeit under challenging market conditions,” Dladla said in a statement last week.
“Our liquidity levels remain healthy and Eskom’s financial profile continues to improve and stabilise.
“Backed by the availability of the government guarantees and the stable financial profile, we do not foresee significant impediments in the execution of the remainder of the FY17/18 funding requirement,” said Dladla.
Eskom is expected to use R43.6bn of its guarantee in 2016/17 and R22bn annually over the medium term, Treasury said in its 2017 Budget Review. Eskom has a R350bn guarantee for the 2016/17 year, with an exposure of R218.2bn.
“Gross foreign borrowings are expected to account for the majority of total funding over the medium term, largely as a result of Eskom’s efforts to obtain more developmental funding from multilateral lenders,” Treasury said in the Budget Review.
The borrowings come despite the power utility being downgraded by rating agencies this year, after Moody’s, S&P and Fitch cut South Africa’s sovereign credit ratings.
By Matthew le Cordeur for News24