ADDRESSING South Africa’s “critical energy constraints” and weak economic growth started with ensuring Eskom was restored to financial stability so it could keep the lights on‚ Finance Minister Nhlanhla Nene said.
He was addressing a PricewaterhouseCoopers function following his delivery of the 2015 budget on Wednesday.
The government has announced financial backing of R23-billion for Eskom so that it‚ among other responsibilities‚ completes its power stations currently under construction.
“We need to repair their [Eskom’s) balance sheet … in order for them to go out there and borrow,” Nene said.
He said the government was also looking at involving independent power producers and promoting co-generation of power.
Former finance minister Trevor Manuel, who was part of a panel discussion at the PwC function, said the “inability” of some state-owned enterprises to “use their balance sheets” was a burden on government coffers and highlighted “issues” regarding their management.
Sufficient electricity supply is essential for businesses to produce goods and for the economy to grow. Forced power outages are among the reasons South Africa’s economic growth forecasts continue to be revised down.
Manuel also said while South Africa faced “enormous challenges”, he was concerned about the large public sector borrowing requirement and the “uptick” in debt ratios.
Pan-African Investment and Research Services CEO and economist Iraj Abedian said “throwing R23-billion at Eskom” was not the solution – a holistic national energy plan was needed. He said by introducing tax increases to boost revenues‚ combined with lower government spending‚ the budget had averted “what would have been a [sovereign credit] downgrade”.
Personal income taxes were marginally raised for the first time in 18 years, while the total fuel levy was increased significantly on lower oil and fuel prices.
Value-added and corporate income taxes were not raised.
Nene said the government awaited more public comment on the Davis Tax Committee proposals so it could assess the effect of raising these taxes on the economy, and how much would be raised from the increases.