Tito targets Eskom’s “mad” indulgence of municipalities who don’t pay

Independent-minded Tito Mboweni has his critics. But even those uncharitable souls have to appreciate the value of his forthright approach in a system which, by its nature, rewards the sycophant and party loyalist. For Mboweni, being in politics is national service, not his only career option. Starting from that base gives him the freedom to serve his nation – able to publicly speak the truth without worrying that he might be displeasing those higher up the totem pole. As he has shown time and again in the past three decades, whether as SARB Governor or, now, head of Treasury, the only corner Mboweni fights is the national interest. He did so again when talking to Bloomberg yesterday, describing Eskom’s indulgence of non-paying municipalities as “madness”. Politically incorrect. But oh so appreciated. Little wonder foreign investors love that he runs what for them is the most important portfolio in SA’s cabinet. – Alec Hogg

South African finance chief bemoans ‘madness’ of Eskom debt

(Bloomberg) – South Africa’s embattled state power utility must prioritise collecting the money it is owed by municipalities as a first step toward becoming financially sustainable, Finance Minister Tito Mboweni said.

Eskom Holdings SOC Ltd. has reported that municipalities owed it R17bn ($1.18bn) in arrears for power purchases by the end of September, a 25% increase from six months earlier. The National Treasury allocated Eskom R69bn over the next three years in the February budget to help it stay afloat.

Mboweni described as “madness” that the government gives municipalities taxpayer money through grants, and then has to assist the power utility because some of those councils don’t pay it for electricity.

“It is not rocket science and it is quite simple,” Mboweni said in an interview in Cape Town on Monday. The arrears “must be collected,” he said.

Eskom hasn’t been selling enough power to cover its operating costs and interest payments. It’s been forced to implement rotating blackouts over the past few years to prevent a collapse of the national grid as its fleet of ageing and poorly maintained plants struggled to keep pace with demand.

President Cyril Ramaphosa, who secured a five-year term when the ruling African National Congress won May 8 elections, announced plans earlier this year to split the company into three units to make it easier to manage.

Operational fix

The company’s debt has increased to almost R500bn, according to data compiled by Bloomberg from public records, including bonds and issued loans.

Mboweni said he has no knowledge of a proposal to set up a special-purpose vehicle that would take over a large part of Eskom’s debt and raise concessional financing on the back of accelerated climate-change commitments. Johannesburg’s Business Day newspaper reported earlier Monday that the option was being considered as part of the plans to restructure the utility.

“I have not received any information about that,” Mboweni said. “The first issue that has to be sorted out with Eskom is operational. It’s not about its finances.”

Eskom bonds have outperformed peers this year on expectations the government will continue to support the utility. The yield on the 2021 bond has dropped 2.96 percentage points this year to 5.89%.

Mboweni is likely to hold on to his job for at least another year when Ramaphosa names his new cabinet next week, according to two people familiar with the selection process, who asked to remain anonymous because they aren’t authorised to comment.