National treasury ‘concerned’ about impact of power constraints on growth

National Treasury is concerned about the negative impact of electricity constraints on growth and potential growth.

“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, speaking to the Foreign Correspondents Association in Johannesburg on Monday.

He commented 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 looked like.

During the Medium Term Budget Policy Statement (MTBPS) Treasury announced a broad package for Eskom that included 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 focused on. The package attempts  to balance a range of interventions in recognition of the fact that there are many different stakeholders that will play a role in returning the organisation to full health,” said Nene.

He said that it needed to be recognised that the key ingredients to addressing Eskom’s funding challenges lay 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 had 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 Nene.