Founder: Turnaround Talk
One of the most pressing issues that Government officials have to deal with whenever they address the public or parliament is South Africa’s current energy crisis.
We are in the midst of the worst year of loadshedding since the practice was introduced in 2008. Recent calculations (provided by Government) estimate that each of Eskoms’ eight loadshedding stages costs the economy an estimated R500-million a day in lost revenue. This means that between 28 June and 15 July (403 hours of loadshedding), the country lost an estimated an estimated R9-billion (R500-million x 18 days). The energy crisis is crippling the country.
It is clear that innovative solutions need to be sourced to address the situation. A recent report shows that South Africa has recently received R9-billion from a Global fund to accelerate our movement away from coal.
Saving grace
The News24 article points out that The Climate Investment Funds – a multilateral climate fund affiliated with the World Bank – had approved the funding.
Last year, South Africa, along with Indonesia and India, were invited to participate in the CIF’s Accelerating Coal Transition (ACT) investment programme. The participating countries had to develop an investment plan.
According to a statement from the CIF, its governing board had endorsed the plans for South Africa and Indonesia – and they would each receive $500 million in “concessional, risk-bearing capital.”
“The decision intends to equip each country with access to $500 million in concessional, risk-bearing capital from CIF’s Accelerating Coal Transition (CIF ACT) investment programme to build momentum toward ambitious climate, energy, and development goals,” the statement read.
“I welcome the decision by the Climate Investment Funds’ governing body to approve $500 million in concessional resources under the ACT Investment Program,” Forestry, Fisheries and Environment Minister Barbara Creecy said in the statement.
Creecy added that estimates indicate over the next eight years, South Africa needs over $60 billion (~R1 trillion) in investments to support its transition.
“The CIF ACT finance will make a meaningful contribution towards South Africa walking down that ambitious pathway to a brighter future of our people, addressing our energy needs, promoting sustainable development and leaving no one behind,” said Creecy.
Photo By: Canva
Retiring the old guard
According to CIF the investment plan from South Africa will support the retiring of several coal-fired plants and bring online clean power and energy storage systems. Also workers and communities affected by the transition – especially women and vulnerable groups – would also be supported.
The News24 article points out that South Africa’s energy sector is the most carbon-intensive among the G20 mostly due to the dominance of coal. A major part of reducing emissions is linked to deploying more renewables.
A fact sheet distributed by CIF unpacks the projects that would be pursued and indicate that a combination of concessional loans and grants would be made available, along with credit guarantees. There is a strong focus on just transition support for workers at coal plants and communities in Mpumalanga, where South Africa’s coal value chain is concentrated.
The article adds that the finance from CIF is expected to crowd in more funding for South Africa’s Just Energy Transition Partnership, which has its roots in the $8.5 billion in climate finance offered by the US, UK, Germany, France and EU at COP26 last year.
Cabinet has recently approved an investment plan for the $8.5 billion. Government is also in talks to finalise two loans – collectively ~R10 billion – from Germany and France’s development banks to support the transition.
A wing and a prayer
SAA was not as lucky and was even snubbed by Enoch Godongwana in his recent Medium Term Budget Policy Statement (MTBPS)
A News24 article points out that Hopes of the medium-term budget providing South African Airways (SAA) with the last monies due to creditors in terms of its business rescue plan were dashed by Finance of Finance Enoch Godongwana on Wednesday – and the Department of Public Enterprises (DPE) is not happy.
Godongwana announced that the final tranche of R16.4 billion, set out in the 2020 Budget Review for the 2020 medium-term expenditure framework, was repaid in July 2022. He said this “has eliminated government-guaranteed debt-related exposure to SAA”.
Receivers wait their turn
The News24 article points out that the receivership debt is due to concurrent creditors, lessors, and unflown ticket liabilities in terms of the approved business rescue plan. Payments in terms of the receivership were to be made over a three-year period. Two of three payments have already been made, and the last is due in August 2023.
The DPE, SAA’s shareholder, announced more than a year ago that it chose the Takatso Consortium as a strategic equity partner to take a 51% stake in the airline and provide about R3 billion as a much-needed cash injection over two years.
The News24 article adds that investment firm Harith and Global Airways, owner of the LIFT airline, are part of Takatso. The Public Investment Corporation (PIC) has a 30% stake in Harith, which owns infrastructure assets, including Lanseria airport.
Takatso has made it clear that it is not prepared to take on any of SAA’s legacy debt. When asked about Godongwana’s medium-term budget not providing any money for the receivership, Takatso referred News24 to the DPE.
The DPE responded to News24 on 27 October that Government has agreed that the outstanding amount to fully implement SAA’s business rescue plan is a legal obligation that it [government] has to fulfil.
“This matter will be attended to in due course. All the regulatory processes are currently being complied with and will be completed as soon as possible. However, the DPE is also aware of a number of efforts to derail [the Takatso] transaction by certain parties or entities that have ulterior motives,” said the DPE.
“We must warn them that they are, as in the state capture period, once again undermining the sustainability of a vital resource and the lives of hundreds of employees who were overjoyed by the return to air of a legendary airline.”
Photo By: SAA
‘Gap’ in funding
The News24 article adds that the “gap” in funding was created when, in his medium-term budget of October 2020, then finance minister Tito Mboweni provided R10.5 billion for the complete implementation of SAA’s business rescue plan. This was less than the R14 billion SAA’s shareholder, the DPE had asked from Treasury. The DPE also wanted funding to help SAA’s subsidiaries Mango, SAA Technical, and Air Chefs, which were not in business rescue at the time.
To still get money for the ailing subsidiaries, the DPE obtained permission from Parliament for a special allocation of R2.7 billion from the R10.5 billion Treasury provided for SAA’s business rescue plan. This created a “gap” in funding to complete what was due to creditors regarding SAA’s business rescue plan.
SAA’s interim chair and acting CEO John Lamola told News24 earlier this year that the first tranche due in terms of the receivership was paid last year. He did not indicate how much this was. By the end of July this year, when the second tranche became due, SAA paid R550 million from its own money to creditors “to keep SAA afloat”, he said.
The article adds that the receivers confirmed to News24 on Thursday that the third and last tranche payment is due in August 2023. They did not indicate when and how much is still outstanding. It now remains to be seen if the rest of the money to finalise the receivership so that Takatso can come on board will be allocated by Treasury in the 2023 national budget in February next year.
SAA told News24 in September this year that government officials were working out exactly how much money the airline still needs from National Treasury to settle what is still due in terms of the receivership. Whatever amount they arrived at was certainly not reflected in Godongwana’s medium-term budget as being for the receivership.
The receivers have indicated to News24 in the past that, in their view, if the funding needed by the receivership is not received, SAA’s creditors and lenders could then take action against SAA itself for not adhering to what was agreed in the airline’s business rescue plan.
