11 September 2018 – Ramaphosa will have the opportunity to provide more details around a R33.4bn Chinese state-owned bank loan to power utility Eskom on Tuesday afternoon when he answers questions in the National Council of Provinces. Both loans are guaranteed by the SA state but their interest rates and the debt requirements have not been disclosed.
Eskom linked the $2.5 bn loan – worth R33.4 bn at the time – with the Chinese Development Bank in late July ahead of the 10th Brics Summit in Johannesburg. The loan, which has a repayment period of 15 years, will be used for construction of Kusile power station.
Transnet concluded a separate R4 bn loan with the Industrial and Commercial Bank of China.
South Africans should insist on the publication of the terms of the loans granted to Eskom and Transnet this week by Chinese state banks, according to Mills Soko. Soko, associate professor of International Political Economy at the UCT Graduate School of Business, admits he is a fan of the Asian superpower but criticised its lack of transparency. Ahead of the 10th annual Brics summit this week, cash-strapped power utility Eskom signed a commercial loan agreement for R33bn with the China Development Bank, while Transnet received R4bn from the Industrial and Commercial Bank of China.
R25bn Chinese loan for Eskom could be tip of iceberg
Eskom, as is well-known by now, is struggling under a massive debt burden of R419 billion, declining revenue, aging plants and maintenance backlogs. The inquiry into state capture this week has revealed how Eskom contravened its own internal processes when it accepted a dubious $2bn loan agreement from Chinese-based business Huarong Energy Africa. The whole situation points to a shroud of secrecy that has covered the terms and conditions that were linked to the commercial loans within Eskom. We have asked parliamentary questions and submitted PAIAs to lift this veil of secrecy, with little success to date. This revelation proves to us that Singh’s attempt to slip through the R25 billion contract could be the tip of the iceberg. The DA will continue to fight for transparency and will not accept clandestine loan agreement with China. This enchanting debt trap has allegedly already trapped other countries like Zambia. Action be needed to reform the energy sector in South Africa before it’s too late. In this light, the DA proposes the following interventions which are immediately available to the President:
– Instruct Eskom to immediately freeze the build on the last two outstanding units at Kusile, and instead look to bring on more IPPs to provide power. Eskom’s debt is spiralling due to cost overruns on the two big coal builds, while the units are not running at full capacity due to design and build flaws.
– Ensure Eskom’s coal procurement policy is immediately changed to allow Eskom to procure coal from any source;
– Reaffirm Eskom’s engineering and maintenance employees as an “essential service” that cannot enter into strike action;
– Immediately review all Eskom’s diesel contracts to ensure the cheapest diesel is sourced from professional and reliable sources; and
– Instruct PetroSA to supply Eskom with diesel at tax-free cost prices to avert a crisis in the short-term.
The ANC government has appointed a technical team of experts, set to report back within four weeks, which will do an operations audit and assess the extent of malfunction at Eskom’s power stations.
The DA has led the charge on ways to fix Eskom over the last year, with the introduction of the Independent Systems Market Operator (ISMO) Bill or “cheaper electricity bill”. The bill seeks to break Eskom into two separate entities – a generation and transmission/ distribution entity. Our offer would see the generation entity privatized in an effort to break Eskom’s monopoly on production of energy, allowing independent power producers to compete on an equal footing in the generation sector. This bill has been gazetted in parliament for public comment.
The DA will continue to fight for a stable, efficient and transparent energy sector that offers cheap electricity to the benefit of all South Africans.
Big fight in parliament