South Africa’s cash trapped power provider Eskom will receive a $1.6 billion bailout in the coming days from the government.
The country’s finance minister made the announcement when presenting the 2019 Budget in parliament on Wednesday.
This is to help give some lifeline to the company which has witnessed financial challenges resulting in power cuts to businesses and homes.
The bailout is part of earlier plans outlined by the President Cyril Ramaphosa.
Finance minister Tito Mboweni told lawmakers that more support to Eskom would depend on South Africa’s economic growth, electricity tariffs and the company’s strategy.
Mboweni however revealed that the government cannot take on the $7bn debt of Eskom.
Eskom bankrupt
Eskom last week was reported to be technically bankrupt according government officials.
The company generates, transmits and distributes approximately 95% of the electricity used in South Africa.
It also plays a role in approximately 45% of the electricity used in Africa.
But there are fears the company will not operate beyond April due to its financial situation.
Reports suggest Eskom’s revenue grew more than four times since 2007 due to tariff increases. But expenses of primary energy and employees grew faster than revenue growth.
For instance employees grew from 32,000 in 2007 to 48,000 by 2018 with the associated costs growing from $691 million to $2 billion.
A statement from the power provider said “We have activated contingency measures in the event that employees participate in the strike action and should there be further impact on our operations.”
The regulator says it will continue to appeal to residents and businesses to use electricity sparingly during this period.
Source: Africafeeds.com
