Medium-Term Budget Policy Statement commentary:
In the 2019 Medium-Term Budget Policy Statement delivered this afternoon, Minister of Finance Tito Mboweni made it very clear that new cash flow support for the state owned entity (SOE) will no longer be equity, but in the form of loans, and that the appropriate size of debt relief will only be negotiated once he is satisfied with progress made to implement Government’s decisions.
According to James McKay, spokesperson for Energy Partners, solving the Eskom challenge is complex, involving a long road of painful trade-offs, and will need adequate time to show positive results. “Eskom is a vital component to the country’s energy future and we therefore support the turnaround plan that was presented to Parliament yesterday. However, this plan will take a long time to have any real effect in its current form and South Africa cannot afford to keep bailing the SOE out.
“We cannot get away from the fact that South Africa has an urgent energy crisis, and while Eskom’s recovery is crucial, the proposed turn-around time-frames don’t match the need. It would therefore make sense to widen the scope of potential solutions and involve the resources available in the private sector in the solution-set.”
According to McKay, accelerating the strategy laid out in the Integrated Resource Plan, and reducing the country’s reliance on fossil fuel should also be considered.
He says that the private sector is a key addition to realising this strategy, as it has access to significant funding and is already spearheading the majority of the technological innovations needed to restore stability to the national grid. “Many businesses have already become exceedingly efficient at generating and managing renewable energy,” McKay concludes.