Tito cancels Eskom’s blank cheque

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By John Fraser

Finance minister Tito Mboweni used his mini-budget (a phrase he hates) to read the riot act to parasitic parastatal Eskom.

In no uncertain terms, he warned that the hundreds of billions in taxpayer bailouts will be history.

In future, if funds are needed, these will be in the form of loans, not gifts.

He said: “At the moment there is a confusion.  State-Owned Enterprises think they can always go to Father Christmas.   Those days are over.”

He told MPs on Eskom that “government is supporting Eskom with R230 billion over the next 10 years. New cash flow support will no longer be equity but will be in the form of loans.

“To meet unanticipated cash needs, they have brought forward R26 billion in 2019/20, R33 billion in 2020/21 and R10 billion in 2021/20. Further delays in operational reforms could mean additional support is required.”

The minister said that asset sales remain under consideration, and he welcomed the fact that SAA has provoked the interest of equity partners, which may remove the “sword of Damocles” hanging over it.

He also condemned public waste, saying that the cell phone costs alone of civil servants amount to R5bn a year.

Business-class travel will be out for domestic flights – from ministers down – and ministers will have R700 000 caps on the purchase price of their official vehicles.   There will also be widespread salary freezes.

Efforts, meanwhile, will also be made in public sector wage negotiations to trim the overall bill – most probably by shrinking the workforce.

Here are some high (low?) lights from the mini-budget:

  • The economy is now forecast to grow at just 0.5 per cent in 2019 compared to the 1.5 per cent expected in February. Growth is projected to slowly rise to 1.7percent in 2022, supported by household consumption and private-sector investment. South Africa’s economic growth continues to fall well short of what is needed to create jobs and raise living standards.
  • Revenue is estimated at R1.37 trillion this year. This is R53 billion, or 4 per cent, less than expected.
  • The main changes to the in-year expenditure projections are:
  1. R26 billion in additional financial support to Eskom
  2. R11 billion to several smaller state-owned companies in financial distress
  3. R430 million approved through the Budget Facility for Infrastructure for student housing.
  • The consolidated budget deficit is now projected at 5.9 per cent of GDP in the current year (4.5% in 2019 budget). This year, the national debt exceeded R3 trillion. It is expected to rise to R4.5 trillion in the next three years.
  • Spending reductions of R21 billion in 2020/21 and R29 billion in 2021/22 have been identified – mostly in the area of goods and services, and transfers. If government wants to achieve its target, it will need to find additional savings in excess of R150 billion over the next three years, or about R50 billion a year.
  • For the foreseeable future, Cabinet, Premiers and MECs’ salaries will be frozen at current levels, with the likelihood of an adjustment downwards. The cost of official cars will be capped at R700 000 VAT inclusive.  A new cell phone dispensation will cap the amount claimable from the state.  All domestic travel will be on economy class tickets. There will no longer be payment for subsistence and travel for both domestic and international trips
  • Government is supporting Eskom with R230 billion over the next 10 years. New cash flow support will no longer be equity but will be in the form of loans. To meet unanticipated cash needs, they have brought forward R26 billion in 2019/20, R33 billion in 2020/21 and R10 billion in 2021/20. Further delays in operational reforms could mean additional support is required.
  • There are conversations involving SAA and potential equity partners, “which would liberate the fiscus from this SAA sword of Damocles.”
  • On e-tolls, Government has decided to retain the user-pay principle. Compliance will also be strengthened.

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