Govt brings forward Eskom bailout to avert default

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Government has had to bring forward the bailout of state power firm Eskom, after it rushed R5 billion to the struggling utility earlier in April to avert a default and said more cash could be needed soon.

Eskom supplies more than 90% of electricity in Africa’s most advanced economy but is grappling with cash flow problems and a debt mountain which it is struggling to service.

The government in February promised Eskom a R23 billion a year bailout over the next three years, but it only expected to start giving the cash-strapped utility the first tranche of funds between August and October 2019.

But by the end of March, Eskom was experiencing difficulties raising funding, according to a finance ministry report to Parliament seen by Reuters, prompting Finance Minister Tito Mboweni to authorise the cash transfer on April 2.

The fact that the first tranche of the bailout had to be brought forward highlights the precariousness of Eskom’s financial position, which has been exacerbated by spiralling diesel and maintenance costs.

“In order to avert a default by Eskom on its obligations, on 2 April 2019, the Minister of Finance, authorised the payment of R5 billion ,” the report to Parliament said, adding Eskom could need another government cash injection before April 30.

A finance ministry spokesperson confirmed Mboweni had authorised the transfer of money to Eskom.

Early in April, Public Enterprises Minister Pravin Gordhan said the highest levels of government were considering a variety of additional financial support measures for Eskom, beyond the bailout announced in February.

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