Finance Minister Malusi Gigaba said on Saturday that he supports the National Energy Regulator of South Africa (Nersa’s) decision not to grant the nearly 20% tariff increase Eskom had applied for as the current state of the economy wouldn’t have been able to support this.

Nersa on Friday, granted the power utility a 5.2% price hike for 2018/2019.

Gigaba told the business breakfast prior to day one of the ANC’s national conference that the government must think about making Eskom financially sustainable as the current model “isn’t financially sustainable”.

“If people complain about SAA, Eskom is a much heavier risk and potential drain on the fiscus than SAA could ever be 100 fold,” he said.

South African Airways required a R10-billion recapitalisation by government in 2017/18 for operational expenses and to repay its debts.

Gigaba promised to change the way the government gives guarantees to state-owned companies (SOCs).

“Next year, [we] will introduce a new policy framework which will be more stringent about how government guarantees are provided… so government isn’t viewed as the bailer of those who are incompetent,” Gigaba said.

Gigaba added that government guarantees are being used to cover operational expenditure at some SOCs, while management have “run down” the entity and the board has watched this take place.

He admitted that the Department of Public Enterprises, which is the sole shareholder in Eskom, could “have done better” to prevent the financial difficulties the state utility faces.

Gigaba acknowledged that the allegations of misgovernance and frequent bailouts of SOCs have harmed economic growth, which is 0.7% in 2017 according to Treasury figures.

“South Africa potentially could have grown above 2% if government implemented structural reforms and SOC reforms, just those two things,” he bemoaned.

Eskom single biggest systematic risk to the entire economy

Richard Wainwright, CEO of Investec Banking SA also addressed the breakfast about the precarious state of Eskom.

“The most urgent task at hand is to fix Eskom. It is the biggest systematic risk to the entire economy. If Eskom defaults, South African banks will not be able to bail it out,” he warned.

Eskom said at a special general meeting of the board on Friday that it will be able to pay salaries in January as it had acquired funding. However acting CEO Sean Maritz did not reveal where the money had come from. Fin24 and EE Publishers reported in November that Eskom had just R1.2-billionn in liquidity reserves by the end of the month.