Eskom remains highly dependent on government support through the debt-relief arrangement, Treasury said in its Medium Term Budget Policy Statement document.

This dependency is despite the recent operational improvement, which has meant that it has not had to impose national load shedding since March 26, 2024, but so-called “load reduction” still impacts residents and businesses where the distribution network cannot cope with excessive demand or illegal connections.

Eskom’s most recent financial plan also targets profitability from 2026/27 onwards, but escalating municipal debt arrears continue to negatively affect its financial performance and present an existential threat.

The debt-relief arrangement granted to Eskom over the past few years was intended to strengthen its balance sheet, enabling it to restructure and undertake the investment and maintenance needed to support stable electricity supply aligned with national needs.

The Eskom Debt Relief Act (2023) was promulgated in July 2023, and Eskom is required to comply with strict conditions attached to this act until March 31, 2026. These conditions included the disposal of non-core assets.

The Treasury said given Eskom’s failure to dispose of the Eskom Finance Company by March 31, 2024, the National Treasury reduced the debt-relief allocation by R2 billion from R78bn to R76bn in 2023/24. This allocation was fully disbursed and converted to equity following Eskom’s compliance with all the attached conditions.

Eskom’s allocation for 2024/25 will be reduced by R2bn to R64bn should it fail to dispose of the Eskom Finance Company by March 31, 2025.

In April 2024, the Eskom Debt Relief Act (2023) was amended to ensure that the loan granted under the debt-relief arrangement is correctly classified and that market-related interest is charged.

Additionally, in June 2024, the National Treasury disbursed an R8bn interest-bearing loan as part of the debt-relief allocation for 2024/25. As of September 27, 2024, Eskom had paid R91 million in interest to the National Treasury for the debt-relief loans.

The Treasury is now working with Eskom to finalise government’s takeover of R70bn of Eskom’s loan portfolio by 2025/26.

BUSINESS REPORT

Chelsea Ntuli

MTBPS: Treasury tightens grip: R2bn at stake in Eskom's debt relief conditions