Government is putting the final touches on a R230-billion bailout package intended to get its debt-stricken state power utility back on track. Except it won’t be nearly enough.
Eskom, which supplies about 95% of the electricity used in South Africa, has more than R440-billion of debt — about R250-billion rand more than chairman Jabu Mabuza says it can afford to service. The government aid, which will be dispensed over several years, will mostly be swallowed up by ongoing losses.
Eskom lost at least R25-billion in the year to March and isn’t generating enough cash to service both its interest and debt repayments, even though it has secured rate increases of more than 500% since 2007, according to Anton Eberhard, a professor at the University of Cape Town who sits on a government task force advising on a rescue plan. The utility, which is due to release results next month, has endured years of mismanagement, massive cost overruns at new plants and a bloated wage bill.
In addition to the rising operating costs, Eskom needs to invest billions of rand in new capacity to meet rising demand and replace obsolete plants — while simultaneously spending huge sums on reducing its environmental footprint.
Eskom is engaging with the government about the structure and timing of its proposed support, the utility said in an e-mailed response to questions.
Eskom expects its annual operating and maintenance costs to increase 17% over the next five years. The costs of fuelling its mainly coal-fired plants will probably surge about 50% over the period.
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