/ MEDIA STATEMENT / The content on this page is not written by Polity.org.za, but is supplied by third parties. This content does not constitute news reporting by Polity.org.za.

The implications of the National Treasury’s discussions with the World Bank to access a $1 billion loan (R19 billion) for Eskom’s unbundling and to upgrade Transnet’s locomotives are a matter of considerable concern.

Among these are:

A deeply constrained national fiscus

South Africa’s budget deficit is expected to grow to 6.5% of GDP, and our national debt is expected to grow to R6 trillion in 2025 – a staggering increase from 2011 levels, coupled by questions of the ability to service the burgeoning debt.

A history of receiving state bailouts with little bang to show for the buck spent and a dubious past history concerning previous loans to Eskom

The controversial $3.75 billion World bank dollar loan in 2010 to finance the construction of Medupi power station;

The approval by the Bank of a R9.1 billion loan for South Africa to decommission and repurpose the Komati coal power station for renewable energy;

During the 2022/23 financial year – the worst year in the history of load-shedding – Eskom received R21.9 billion in equity support from the government. The government has also taken over R254 billion of Eskom debt over the next three years to provide the power utility with space to allocate more capital to the maintenance of its power aging stations;

The ongoing danger of Transnet’s defaulting on loan covenants

Already Transnet’s failure to meet its cash interest cover (CIC) ratio of 2.5 times, means it is now in breach of debt covenants with some lenders;

Despite this, Transnet has been reported to be talks with the BRICS New Development Bank for an R18 billion loan to upgrade its locomotives

Eskoms's total debt alone is almost equal to the total national budget for education, and more than the spending on health or social development.

A state that has proved to be incapable of fixing and delivering to the nation’s needs in both energy and logistics has no business contemplating further massive loans to shore up broken monopolies.

Surely the time has come to break these monopolistic entities into self-standing businesses that can be either sold to the private sector or concessioned with favourable terms while the government attends to securing the safety of the infrastructural environment. Debt can then be raised, as required.

The DA is keen to see the conditionalities attached to the putative loans and will continue to push for the unbundling and privatisation of the entities. The government should be considering guaranteeing the loans via creative Public Private Partnership arrangements and ensuring that proper governance and zero political interference becomes the order of the day. That is the only way the DA would even begin to look at these injections of capital.

Issued by Ghaleb Cachalia MP - DA Shadow Minister of Public Enterprises