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Budget 2019 – and what it means for keeping the lights on

So today Finance Minister Tito Mboweni has delivered his maiden budget – and there isn’t really all that much in it.

So, lets start with Eskom’s unbundling. According to ENCA, Mboweni has stated that government will not be taking on Eskom’s debt.

“Pouring money directly into Eskom in its current form is like pouring water into a sieve. I want to make it clear: Government is not taking on Eskom’s debt. Eskom took on the debt. It must ultimately repay it.”

What government will be doing however is providing about R69-billion over three years to help Eskom unbundle into three units.

While Mboweni didn’t say “Privatisation” once during his speech, he did say it was time for South Africa to question whether we needed all of our state-owned enterprises.

According to The Citizen Eskom will be getting a R23 billion bailout this year, but this will have to be paid back by the utility.

“The fiscal support is conditional on an independent Chief Reorganising Officer being appointed by the Ministers of Finance [Mboweni himself] and Public Enterprises [Pravin Gordhan], with the explicit mandate of delivering on the recommendations of the Presidential Task Team. We will make announcements in this regard in the next coming weeks,” Mboweni said, according to the Citizen.

While income taxes and VAT have largely been left alone, fuel levies and sin taxes will be going up as follows, according to Fin24:

Alcohol and tobacco are going up between 7.4% and 9%, while South Africans will be paying 29 cents more per litre for petrol and 30 cents more per litre for diesel.

It is unclear whether this will reduce drinking and driving due to people not being able to afford both the petrol or the booze.

According to Fin24, Eskom currently owes about R420 billion.

According to the Mail and Guardian in 2018, Eskom’s finance costs had risen to R32 billion.

Moneyweb reported earlier this month that Eskom needed about R8 billion to fix design flaws at its new Kusile and Medupi power plants.

In November 2018, Business Day reported that Eskom’s budget for maintaining its power plants had been slashed, and that it would take two years to get them back up and running properly.

My Take

It will cost a lot of money to unbundle Eskom, particularly as it will suffer a lot of billing confusion while this is going on.

Eskom’s finance costs more or less eat the bailout, which means that the debt is just going to get bigger at this rate.

And we cannot afford for Eskom to go under. Last week was nothing on how disastrous a national power out could be, and if Eskom dies that’s more or less what is going to happen.

I don’t think privatisation is the solution as, while its monopoly is very attractive, that debt is not. You’ve got to find a buyer before you can sell.

This budget looks to me like a holding pattern.

The thing is we’re in a pretty bad place as a country, and we want out. A holding pattern isn’t really going to help us.

While I get Mboweni’s point that Eskom is currently managed so badly that more money in may as well be more money gone, it is an important admission by the ruling party.

Cadre deployment has resulted in a situation where the people doing the deploying cannot trust their own cadres with the money that needs to be spent to fix this problem.

You can’t stop a robbery by deploying more robbers, and that is really all the restructuring idea amounts to.

We need a new ruling party, else this is just going to carry on.

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