Adding Eskom debt to South Africa’s R4 trillion national debt burden will be reckless and irresponsible

20 July 2022

Note to Editors: Please find attached soundbite by Dr Dion George MP.

Media reports that President Cyril Ramaphosa, as part of his measures to address the energy crisis, will announce a partial takeover of Eskom debt by the State and its allocation to the sovereign balance are not only alarming but pose a dangerous risk to South Africa’s sovereign debt profile.

The DA will reject any steps taken by the President to use any of his Executive powers, or emergency authority for that matter, to make a unilateral decision on national debt without parliamentary input.

To this end, the DA will be writing to the Minister of Finance, Enoch Godongwana, asking him to deny or confirm the veracity of these claims. The Minister, as the custodian of National Treasury, has an obligation to protect the integrity of our public finances and protect the fiscus from unnecessary risk.

In February, the International Monetary Fund (IMF) warned that shifting Eskom’s debt onto the State’s balance sheet would precipitate a marked deterioration in the nation’s already stretched finances. Surging debt and debt-service costs has become the fastest-growing expenditure line item in the budget. Instead of making it worse, government should be taking steps to minimise risks to fiscal sustainability.

Taxpayers should not be asked to shoulder a sinking Eskom ship that was looted by political elites and their proxies during the heydays of State capture.

As a result of Eskom’s unviable business model and the State-owned enterprise’s (SOE) inability to generate sufficient revenue to cover its debt, which currently stands at over R390 billion, placing Eskom’s debt liabilities on the national balance sheet will create a bad precedent. According to the 2022 Budget Review document, the total liabilities for SOEs (combined debts owed by SOEs) for 2020/2021 is R853.4 billion. Taking over Eskom debt will create a very costly expectation from other failing SOEs, wherein they might expect government to take over their debt and subsidise their underperformance.

An immediate outcome of taking over Eskom debt is that President Ramaphosa’s government risks downgrading South Africa back to junk status almost immediately. With ongoing upheaval in the global economy and a struggling local economy, any further economic shocks will send the economy over the edge and plunge South Africa into a debt crisis.

Issued by Dion George, DA Shadow Minister of Finance, 20 July 2022