Will China be loaning R7bn to a cash-strapped Eskom?

Foreign investment plays an instrumental role in any country’s economy. But when it comes to China loaning Eskom a staggering R7 billion, is this truly an investment or a step in securing a foothold in our country?

Eskom’s financial standing has been a sore point for many a South African for some time. With approximately R440bn in debt, which it is unable to service from the revenue it earns, who isn’t worried about the effects it will have on our country?

However, the loan from China is set to assist the power utility unit. Ensuring the company’s services are not hampered due to a lack of financial security.

But when will Eskom receive the much-needed funds?

The China Development Bank (CDB) was meant to release funds in April this year. This follows the CDB loan failing to materialise in March, nearly plunging the already cash-strapped power utility into a further financial crisis.

What is the hold up with the loan?

Reports claim China is cautious of Eskom’s promises about the construction of the power stations, Medupi and Kusile. Allegedly, the investing country is worried the power utility might not continue with the construction of the power plants once the money has been transferred.

In May, Adrian Lackay, the spokesperson for Minister of Public Enterprises Pravin Gordhan, claimed senior department officials had flown down to consult CDB Officials. According to the Lackay, the meetings went well and assured the loan was not in danger, with the transfer expected to take place soon.

With the loan being meant only for construction costs in respect to the two power stations, the Chinese became concerned about money being sucked up by salaries and diesel for turbines. These fears allegedly stem from public comments claiming Eskom is considering scrapping the construction projects.

While Eskom assures the projects will continue, it seems the loan has still not come into effect.

In fact, Finance Minister Tito Mboweni had to authorise an R17.6bn allocation to Eskom. On July 3, Treasury officials informed a joint sitting of the standing and select committees on appropriations on the 2019 Appropriations Bill.

According to a statement issued by the committees, the finance minister had to evoke a section of the Public Management Finance Act to authorise funding in emergency situations.

The statement explained the R17.65bn allocation follows the delay of the R7bn funds committed by the China Development Bank. As well as the Corporation for Public Deposits declining to provide a bridging facility.

With the South African government yet again bailing out Eskom and delays in the loan from CDB, it seems Eskom will continue staggering along as it attempts to lift itself out of a financial crisis.

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