South Africa finance minister warns on electricity problems

19 May 15

Problems with the reliability of South Africa’s electricity supply could hurt economic growth, according to the country’s finance minister Nhlanhla Nene.

Speaking to the Foreign Correspondents Association in Johannesburg on Monday, Nene said: ‘We are concerned about the negative impact the electricity constraints is having on growth and potential growth. Ensuring that Eskom (a state-owned electricity utility) returns to full financial and operational sustainability is a top priority of government.’

Inadequate maintenance of power plants and distribution networks had hurt the electricity utility, the minister warned. He added that it resulted in the deterioration and unreliable performance of the plants and networks – in turn leading to higher maintenance costs.

In February, during the reading of South Africa’s Medium Term Budget Policy Statement (MTBPS), the government announced a broad package for Eskom including, a capital injection of R23 billion, governance improvements, operational cost containment and additional borrowing and support for required tariff increases.

The fiscal allocation of the R23 billion will be paid in three instalments with the first transfer to be made in June, through the government’s non-core state assets, it said.

‘The government support package is more than the R23 billion capital injection that many have focussed on. The package attempts to balance a range of interventions in recognition of the fact that there are many different stakeholders that play a role in returning the organisation to full health,’ Nene said.

The National Treasury has also taken steps to encourage municipalities to finalise payment plans and repay Eskom debts. The government is achieving this by not releasing equitable share payments to municipalities that have outstanding debts to Eskom and fail to acknowledge it.

Nene also spoke about public institutions more generally, saying that although they were in a strong financial position and contributing to fiscal sustainability and public welfare, in recent years the financial and operational performance of several state-owned companies and development finance institutions had weakened.

He warned that poor-performing and inefficient entities posed significant risks to public finances.

‘Inadequate policy frameworks, regulatory uncertainty, poor operational performance and governance failures often lie behind the deterioration in financial positions,’ he said.

He said the government would try to deal with the funding needs of public institutions in a way that did not increase the budget deficit. In addition, authorities will work with these institutions to develop sustainable financial frameworks supported by turnaround plans.

  • Judith Ugwumadu
    Judith Ugwumadu

    Judith writes about public finance, public services and economics across Public Finance International and Public Finance. She previously undertook reporting stints at Financial Adviser, Global Security Finance and The Sunday Express.

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