President Cyril Ramaphosa has pledged to ensure the speed up of the release of the R230 billion of support for the ailing power utility Eskom, which he says is too vital to the economy to be allowed to fail.
In his first State of the Nation Address (SONA) as head of the sixth administration, Ramaphosa said Eskom’s financial position remained a matter of grave concern.
He says Parliament will urgently table a Special Appropriations Bill to allocate a ‘significant portion’ of the fiscal support that Eskom requires.
Ramaphosa, however, did not say what proportion of the fiscal support would be allocated. He says Eskom only has sufficient cash to meet its obligations until the end of October 2019.
“The utility’s financial position remains a matter of great concern though. For Eskom to default on its loans, will cause a cross-default on its remaining debt and would have a huge impact on the already constrained fiscus. We will therefore have to address this matter, by tabling a Special Appropriations Bill on an urgent basis, to allocate a significant portion of the R230 billion fiscal support that Eskom will require over the next ten years,” says Ramaphosa.
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Meanwhile, corporate law experts have warned that the role of the Chief Restructuring Officer could easily create conflicts with the Board and other executives if it is not properly defined.
This after Ramaphosa announced that Eskom will soon create a position of Chief Restructuring Officer.
Company law expert Matodzi Ratshimbilani has cautioned against making the role too powerful over the board and the Chief Executive Officer (CEO).
He says it will be interesting to see how the role will be incorporated in Eskom in terms of the law.
“Eskom has a shareholder in the unclear from a legal perspective what the decision making power of the Chief Restructuring Officer will be and therefore the details will be important. What will be undesirable will be when a party stands over and above the Board to direct how they should manage Eskom. This concept has been implemented internationally after the financial crisis,” says Ratshimbilani.
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