Finance Minister Tito Mboweni has allocated an additional R26-billion to debt-ridden Eskom for 2019/20 and R33-billion for 2020/21 in a bid to help the utility meet its financial obligations.

“Eskom’s funding plan is dependent on Eskom raising additional finance from the market, which in turn requires Eskom to be a going concern. It is, therefore, important to note that the proposed financial support for 2019/20 and 2020/21 financial years addresses the going concern status and enables Eskom to honour its obligations,” Mboweni told the National Assembly on Tuesday.

A Special Appropriation Bill will provide funding from the National Revenue Fund for the additional funding.

But Mboweni warned that Eskom's debt and restructuring would have to be dealt with in order to ensure the future sustainability of the utility.

“At a strategic level, we must thus face the reality that a large, vertically integrated energy company is an outdated model in a changing industry, both domestically and internationally.”

He said the utility’s debt had come at a huge cost.

“Honourable Members should be reminded that the fiscal support we are announcing today will come at a significant cost to the fiscus and to South African taxpayers.”

Mboweni said that, in addition to the financial support to Eskom, there was also a preliminary indication that tax revenue could be significantly lower than budgeted for in the 2019 Budget.

“This could substantially increase the government borrowing requirement for 2019/20, which will require government to revise its funding strategy and weekly bond issuance levels before the Medium Term Budget Policy Statement in October.”

Mboweni said Eskom faced serious financial and operational challenges, “to a large extent caused by governance challenges playing themselves out in the Zondo Commission”. He added that the government was also facing a decline in investor confidence.

“As it stands, Eskom is not financially sustainable” based on high levels of debt and was unable to generate sufficient revenue.

“What we are trying to indicate here is that we are facing a very serious financial situation. Eskom’s debt is reliant on its liquidity position and this has worsened.”

The Minister said he had been in talks with Public Enterprises Minister Pravin Gordhan about appointing a chief restructuring officer for Eskom.

“Eskom presents the biggest risk to the fiscal framework because of its financial problems and negative impact on the economy. Given the high risks of systemic failure if Eskom were to collapse, government is urgently working on stabilising the utility, while developing a broad strategy for its future.”

Mobweni said Eskom was not financially sustainable based on its current high levels of debt and its inability to generate sufficient revenue to meet its operational and capital obligations, which exposed the entity to high levels of liquidity and balance sheet risks.

“Therefore, without major changes to Eskom’s business model and financial assistance being provided by government, the company will be unable to meet its financial obligations through the 2019/20 financial year.”

Opposition parties slammed Eskom and criticised the 2019 Appropriations Bill, with the Democratic Alliance (DA) calling it a "bailout budget".

“Ordinary South Africans are being asked to pay twice for electricity – through their energy bills – and through their taxes. Ordinary South Africans, not the looters and capturers, are being asked to pay back the money,” said DA Member on the Appropriations committee, Ashor Sarupen.

Closing the debate on the Appropriations Bill for Eskom, the Finance Minister said the debt to GDP ratio in South Africa was at unacceptable levels, “providing a base for a serious crisis in the country”.

He appealed to all political parties to spread the message to South Africans.

“We appeal to the political leadership of this house from all political parties that we reach out to our people and enter into a compact with them . . . that we appreciate and support the user pay principle. Now is the time for all of us to pay for services rendered.”

Mboweni also told Parliament that a contingency reserve account would be used to provide support for the South African Broadcasting Corporation (SABC), Denel and South African Airways.

“The SABC requires R3.2 billion. We will not just make that available tomorrow. That would be a mistake. We will release the money when certain conditions are met to make sure that there is progress in changing the organisation.”

Mboweni said chief restructuring officers for each of the entities would be announced tomorrow.

“They will work with the management of these institutions to get them back on track.”