The civil rights organisation AfriForum today strongly opposed the Public Investment Corporation’s (PIC) loan of R5 billion to Eskom. The PIC yielded to Eskom’s request for a loan on behalf of the state pension fund, whose assets they manage.
“This loan has been feared for some time and now it has become a reality. While the challenges faced by the new management of Eskom to solve the electricity provider’s short-term cash flow problems can be understood, this remains a poor solution,” says Dr Eugene Brink, AfriForum’s Strategic Advisor for Community Affairs.
Brink further says that Eskom’s new management has not yet indicated how they intend to turn the company’s affairs around.
“At this stage we have only received assurance that things will improve and some of the bad seeds have indeed been removed, although this loan surely does not promote trust. Irrespective of this loan, the new management has done nothing tangible to show that they can turn Eskom around.”
According to Brink the reimbursement structure of Eskom’s management must be reviewed, the outstanding money from municipalities be collected and irregularities with the supply chain be sorted out.
“Looking at Eskom’s finances, even with a good management team there is a very slight chance that the situation will improve. They are incurring debt to pay off debt while their income is decreasing. Eskom has also used up more than R275 billion of its R350 billion state guarantee, while its debt currently stands at R367 billion. Therefore, there is a very good chance that the PIC loan will not be paid back and that could hamper future loans. It could furthermore cause millions of people whose money is invested in this fund as well as their dependents, to be plummeted into an enormous economic disaster,” he says.
“This loan also opens the door to easily acquire a loan from the PIC. It furthermore only covers February’s problems; will they want another loan in March and April?” asks Brink.
He says that AfriForum is committed to continue to fulfil its watch dog function with regards to electricity supply to communities and municipalities, but will also endeavour to open up the electricity supply market to private suppliers.
“The competition this brings will decrease the price of electricity and will provide communities with a bigger say in their own electricity supply instead of continuing to keep the current expensive and damaging state monopoly going.”