Amid treasury’s effort to financially resuscitate failing government enterprises like the South African Airways (SAA) and the South African Broadcaster (SABC), comes emerging report about the state’s power utility Eskom being in a deeper financial mess.
In a latest report to its shareholder representative, Public Enterprises Minister Lynne Brown revealed that the state power utility’s financial status is fast drying up, as it struggles to raise funds in an unsympathetic market.
The Utility’s report for the second quarter of 2017 gave an alarming picture of funding difficulties with only R1.2bn of liquidity reserves expected to be on hand at the end of the month.
This was mainly blamed primarily on the perceptions of poor governance which has been said to have left it teetering on the edge of insolvency.
Eskom explained to Minister Lynne Brown that the issue of governance in the power utility has had a negative impact on financial sustainability and the utility’s ability to keep going.
Several key Eskom executives, including suspended chief financial officer Anoj Singh, ex-Eskom boss Brian Molefe and suspended executive Matshela Koko are being investigated for their role in the financial collapse of the power utility and the ongoing allegations of state capture.
The parliament has also heard several shocking reports about how looting remained prevalent at Eskom with the assistance of key executives. This left the utility with just R1.2bn cash in hand at the end November 2017 against a target of R20bn.
The report seen by the media further estimated that Eskom will move into a negative liquidity position of approximately R5bn by the end of January 2018, which raises questions on whether Eskom will be able to pay salaries and other operating costs.
In reply to this, Eskom said in the report that it had no other option but to tighten its belt considerably and reduce its short-term capital expenditure by R5bn to R10bn until its funding issues are resolved.
Eskom spokesperson Khulu Phasiwe also believes that an increase in tariffs over time, additional funding initiatives and the cost-cutting exercise under the current strategy will ensure that Eskom maintains its going concern status. He added that cost-cutting has been effective in further improving liquidity “and remains a focus area going forward.”
Questions were raised on whether or not the National Treasury would respond to the utility’s financial failure through possible bailout funds like it did to the embattled state’s airways, SAA bu the treasury is yet to provide its reply to the regard.
The Department of Public Enterprises and Eskom has, however, been established to find a solution for the state utility’s economic woes.
The SAA and the SABC has reported financial inadequacies and the Treasury has so far proposed to bail out the SAA with about $700 million in the 2017-18 financial year.
Delivering the government’s Medium Term Budget Policy Statement (MTBPS) Oct. 25, the finance minister Malusi Gigaba said that R5.2 billion had already been provided, with the remaining R4.8 billion to be transferred by 31 March 2018.
The funds will be used for working capital and to settle debt, enabling the airline to reduce its interest expenses and to ensure it continues to operate as a going concern.
Despite the capital allocation, government’s exposure to SAA debt remains significant at R15 billion.
The SABC, on the other hand, is facing a financial crisis which has seen it unable to meet its contractual commitments.
Monthly revenues/income was lower than embedded expenditure/costs and some service providers of vital content and services cannot be paid. At the end of the first quarter, the SABC had outstanding debt of R597m.