The government will bail out cash-strapped power utility Eskom, Finance Minister Enoch Godongwana said during the presentation of the national Budget Speech in parliament on Wednesday.
Godongwana said the government will take over R254-billion of Eskom debt. “The lack of reliable electricity supply is the biggest economic constraint,” Godongwana said.
Since the 2009 fiscal year, the government has provided the utility with R263.4-billion in bailouts; the latest injection will take that figure to R517.4billion. Yet, despite receiving all that money, Eskom had a record 207 days of loadshedding in 2022 compared with 75 days in 2021.
“These allocations have failed to stem the collapse of Eskom’s balance sheet and operations. The utility imposes an enormous drain on the economy, and its debt stands at an unsustainable R423-billion,” National Treasury wrote in the 2023 Budget Review.
As a result, state debt will increase, including the R118-billion in extra borrowings, and the government expects its debt-to-GDP (gross domestic product) ratio to peak at 73.6% of GDP in its 2026 fiscal year.
That is at a higher level than the National Treasury forecast in the 2022 medium-term budget policy statement in October 2022.
“This arrangement, subject to strict conditions, will relieve extreme pressure on the utility’s balance sheet,” National Treasury acting director-general Ismail Momoniat wrote in the Budget Review.
To alleviate the energy crisis, the government also announced that it will support roof-top solar rollout for households with a tax incentive to encourage electricity generation and expand the renewable energy tax incentive for businesses.
All the individuals who install roof-top solar panels from March 1 2023 can claim a rebate of 25% of the cost of the panels, up to a maximum of R15 000. The incentive will be available for a year.
From March, businesses can reduce their taxable income by 125% of the cost of an investment in renewables.
The government has proposed tax relief of R13-billion for the 2024 fiscal year to support clean energy, increase the electricity supply and limit the impact of high fuel prices. It will provide R4-billion in relief for people who want to install solar panels and R5-billion to companies by expanding renewable energy tax incentives.
The National Treasury projected the public sector to spend R903-billion on infrastructure over the medium term. “The largest portion of this, around R448-billion, will be spent by state-owned companies, public entities and through public-private partnerships,” the government said.
It also plans to spend R351-billion on transport and logistics and R133-billion on water and sanitation infrastructure.
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