Eskom in the spotlight amid Stage 6 rolling blackouts, but Finance Minister Godongwana's to-do list is long

20 Feb 2023

Finance Minister Enoch Godongwana must put the rands and cents to President Cyril Ramaphosa’s State of the Nation Address political promises. It’s an unenviable task – without political glamour and without any control of how Cabinet colleagues actually spend their departmental allocations.

Rooftop solar subsidies for businesses and households are a tick in the Budget announcements. President Cyril Ramaphosa in his State of the Nation Address (Sona), and reply earlier this month, twice said his finance minister would announce the details – come Budget – in what appeared to be the executive’s spin on seamless operations.

A rejigged bounceback scheme to allow small business favourable financing terms to shore up against the rolling blackouts? Pencil it in for Wednesday, given that Ramaphosa in his Sona speech said National Treasury was working on adjustments to the scheme first launched during the Covid-19 lockdowns.

An extension of the monthly R350 social relief of distress grant, a definite tick as announced by Ramaphosa earlier in February – “[W]e will continue the social relief of distress grant…” – as part of the presidential comments on social protection. The rising cost-of-living crisis that’s bashing the vulnerable, who increasingly must decide between food or transport to work or school, but also workers and middle class families.

But among Godongwana’s biggest bugbears are Eskom debt, and the public wage bill.

Containing public servants’ wages has been key to the government Budget juggle, also with ballooning debt repayment costs, the fastest rising line item.

In late 2022, government decided not to pay the scheduled increase, and successfully argued its unaffordability in court. This now hangs over the 2023 negotiations, for which government is offering an average 4.7%, although the sliding scale provides greater increases for the lowest paid workers.

Read more in Daily Maverick: “Government proposes below consumer inflation pay rise for public servants”

Godongwana is expected to talk to this. He will also have to talk about Eskom and Eskom debt on Wednesday, just as Stage 6 rolling power cuts hit South Africa again.

“To ensure Eskom’s long-term financial viability, government will take over a significant portion of the utility’s R400-billion debt... [T]he quantum is expected to be between one-third and two-thirds of Eskom’s current debt ... Further details of the programme... will be announced in the 2023 Budget,” said the finance minister in the October 2022 Medium-Term Budget Policy Statement when he kicked the Eskom can down the road (2022 Medium-Term Budget Policy Statement Speech).

Expectations are widespread that up to R250-billion will be taken from the troubled power utility’s debt book and moved to be carried by government. While the devil will be in the detail on Wednesday, such relief has been in the making since 2018.

Then the ANC wanted about R120-billion taken off Eskom’s debt in an equity swap by the Public Investment Corporation (PIC), the state-owned manager of now more than R2.5-trillion in government pensions and social savings.

Read more in Daily Maverick: “ANC looks to PIC to stabilise financially troubled Eskom by turning R120bn loan into equity”

It didn’t happen. But the idea resurfaced a year after the Budget 2019 Eskom bailout billions; R23-billion in annual instalments over 10 years after an initial R59-billion.

Read more in Daily Maverick: “Mboweni’s The Eskom Job: The devil lives in the details”

In February 2020, labour federation Cosatu took its proposal that the PIC take off R250-billion of the Eskom debt to the social partners at Nedlac, the National Economic Development and Labour Council.

Read more in Daily Maverick: “Cosatu’s proposal for PIC-funded R250bn bailout and Eskom's municipal debt take centre stage”

And while it’s understood significant agreement was reached, nothing ever came of such proposals.

Other state-owned entities (SOEs) must feel like neglected stepchildren in the bailout family. SAA is still missing R3.5-billion to finalise its sale, while the SABC remains short of money – and a properly constituted and appointed board. Denel needs a bailout, as does the SA Post Office, the Land Bank and more.

Despite the 2019 bailout deal for a decade, Eskom remains financially vrot. With this week’s Stage 6 rolling blackouts, on Wednesday Godongwana has the unenviable task of having to deal with this, just as demands come from, well, just about everyone.

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Cosatu, the ANC’s alliance partner, wants a “social investment strategy” to – in the long term – reduce debt to gross domestic product without giving details.

“What we cannot afford is a limp-wristed Budget that deceives the government into believing that our sole crisis is reducing the public deficit and if that is done, then miraculously all other challenges will simply disappear,” the labour federation said in a statement earlier this week.

But government has repeatedly pointed out that two-thirds of the Budget already is on social spending and the social wage – from no-fee schools, free healthcare and subsidised basic services, to social grants.

The ANC said it expected a “pro-poor Budget that seeks to re-energise the economy…” in a statement on Monday, while the DA tabled an alternative Budget that would seek private investment in all SOEs, overhaul procurement and other financial regulations while allowing for tax relief, including zero rating bone-in chicken and other mainstay nutrition products.

Central to South Africa’s economic woes is, politely put, lacklustre economic growth which falls short of other emerging markets. The South African Reserve Bank revised growth this year to 0.3%, down from 1.1%. It’s expected that National Treasury would also adjust its initial 1.6% growth expectations in Wednesday’s Budget documentation.

This flailing economic performance comes two-and-a-half years after the launch of South Africa’s economic recovery and reconstruction plan, announced by President Ramaphosa in Parliament in October 2021.

Read more in Daily Maverick: “Economic Reconstruction and Recovery Plan shows a new determination, says Ramaphosa”

“Our foremost concern … is to ensure the plan works, not for an administration or any political party. It must work for the people of South Africa,” said Ramaphosa then, listing infrastructure spend and more job creation through the presidential employment stimulus and a buy local campaign.

Yet, on just about every indicator, growth has not materialised as expected. What allows Godongwana some wiggle room is the consistently solid collections by the South African Revenue Service.

But unless government improves implementation and spending efficiency, much of the finance minister’s rands and cents may not achieve their aim, Business Leadership South Africa CEO Busi Mavuso didn’t mince her words on Monday.

“A glance at the unfortunate states of our public health and education systems shows that often it is not lack of money, but inappropriately capacitated departments, misgovernance and, sadly, corruption that causes the problems.”

With the focus since Sona on easing the intensity of the rolling blackouts, Deloitte Africa director and indirect tax leader, Olebogeng Ramatlhodi, recently suggested in a statement that broadening the diesel fuel tax refund system would soften the blow of having to spend more on generators.

Agri SA – organised agriculture – agreed with this in a statement on Monday, while calling for “lowering or removing cumbersome taxes on struggling agricultural industries such as the excise taxes on tobacco, wine and beer as well as the Health Promotion Levy”.

Godongwana’s task is unenviable – and unlikely to particularly please anyone come Wednesday afternoon. DM

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