Business | The government now wants to unbundle Eskom into four companies – generation, transmission, distribution and a holding company. But this does not address any of Eskom’s immediate financial and operational issues.
Two decades ago, China’s four state-owned banks, which then accounted for almost 90% of the country’s banking assets and loans, were on the verge of collapse after years of policy lending or political instructions to support the government’s economic development priorities. They had nonperforming loans that accounted for about 40% of total loans. Indecision would have derailed the country’s economic miracle.
Last week, Eskom was on the verge of collapse after a R7 billion drawdown on a R36 billion loan from the China Development Bank – the world’s largest development finance institution, with assets of more than $2 trillion – failed to come through on time. The GEPF is a defined benefit fund. This means that its assets belong to the government and not the workers. The workers do not benefit or make losses if the value of the assets in the PIC increase or decrease. The GEPF says benefits are guaranteed – based on years of service and final salary – and are not dependent on investment returns or the level of member and employer contributions. Therefore, the GEPF is the government’s means of financing its obligations to public sector employees.
So, how did Eskom get into this mess? It has very little to do with the midnight contract that a previous board gave to the Gupta family. Eskom awarded the contract to Tegeta during 2015. The hijacked contract was worth only 2% of the power utility’s revenues in 2016. But the government instructed Eskom to wait as the plan was to privatise parts of the company. Nobody was interested, partly because of the low cost of electricity. In 2007, Eskom announced a huge investment programme a few months before rolling blackouts in October. But there was no plan on how to finance it.
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