Eskom package must not strain economy: Cabinet

Eskom package must not strain economy: Cabinet

The recently-announced measures aimed at helping Eskom out of its financial crisis and ensuring energy security must not add further pressure to the economy, says Cabinet.

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The recently-announced measures aimed at helping Eskom out of its financial crisis and ensuring energy security must not add further pressure to the economy, says Cabinet.


"All of this will have to be done in a manner that does not add further pressure to the nation's finances," acting Cabinet spokeswoman Phumla Williams said in a statement on Thursday, a day after the executive's fortnightly meeting.


At the same time, government would like to ensure that poor households were cushioned, as far as fiscal resources allowed, from the impact of the tariff adjustment.


The package, announced by the National Treasury last weekend, includes tariff increases and increased borrowing.


"In summary the package consists of, among others, an injection by government of additional equity into Eskom to help the utility strengthen its balance sheet, enabling it to borrow more from financial markets.


"To ensure that government's financial resources are not strained, the equity injection will be funded by leveraging non-strategic government assets."


Further details would be given by Finance Minister Nhlanhla Nene in his medium-term budget policy statement on October 22.


Williams said other elements of the package included a strong improvement in Eskom's operational efficiencies, which would reduce costs, and a R50 billion increase in debt raised by Eskom, which would be supported by the existing government guarantee.


Further, government would back Eskom's application to the National Energy Regulator of SA for an adjustment to the tariff, which was in line with normal regulatory processes.


Other elements included demand management measures, refinements to energy policy, and expansion of the independent power producer programme.


"In terms of cushioning poor households, government will strengthen oversight of the free basic electricity grant."


This would ensure that allocations were used effectively, as well as encourage municipalities to improve the efficiency with which they maintained their networks and supplied power to consumers.


"These measures are necessary for South Africa to raise economic growth to a rate which is sufficient to create more jobs, reduce poverty and inequality," it said.

 

 

(File photo: Gallo images)

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