Special Appropriations Bill [B16-2015]; Eskom Subordinated Loan Special Appropriation Amendment Bill (2008/09-2010/11 financial years) [B17-2015]: National Treasury briefing

Meeting report

Briefing by National Treasury
Mr Anthony Julies, Deputy Director General: Assets and Liability Management at National Treasury, said much of what will be presented has been announced during the medium term budget policy statement in October 2014, when the Minister of Finance announced the support package which would be given to Eskom due to the difficult situation it finds itself in. This package includes the R23 billion equity injection transferred to Eskom and the conversion of a “deeply subordinated loan” of R60 billion into equity. Further, there is already approval of a 12.6% tariff adjustment and further adjustments to ensure that tariffs are cost reflective. There is also a R350 billion guarantee facility for debt Eskom enters into, which will be serviced by the government in the event of a default. To date Eskom has borrowed R150 billion and therefore there is an exposure of government to this value. Eskom is expected to undertake savings initiatives and it is projected that Eskom will save R60 billion over five years.

Mr Julies said the background to the current situation at Eskom includes the number of significant delays in the build programme, including at Medupi and Kusile, which have resulted in increased cost and insufficient power supply. There is inadequate maintenance of power plants and the distribution network which has led to deteriorating and unreliable performance, as well as higher costs. Also the demand for electricity decreases as tariffs increase which has the effect of decreased revenue. These factors have led to the present financial situation and necessitated the Minister’s announcing the support package. In September 2014 Cabinet approved the support package inclusive of the elements mentioned above. Part of this was the commitment to transfer R23 billion and to convert the subordinated loan.

Eskom Special Appropriations Bill [B16-2015]
Mr Julies said this Bill dealt with the transfer of the R23 billion to Eskom as part of the support package. The funds would be transferred in tranches with the first R10 billion in June 2015 and a further R10 billion by December and the remaining R3 billion in 2016/17. An important condition for this transfer is that this allocation will be funded through the sale of non-strategic government assets. The funds being from the sale of these assets means there will be no effect on the fiscus and would be neutral on the fiscal framework and the budget deficit. Measures are on track for the transfer of the first R10 billion in June.

Ms Empie van Schoor, Chief Director: Legislation at National Treasury, explained the Bill saying the appropriation of the R23 billion would be subject to the payment of the proceeds from the sale of assets as mentioned previously. As all appropriations flow through a government department, the appropriation falls to the Department of Public Enterprises (DPE) in the 2015/16 financial year to enhance electricity generation and security of supply by Eskom. Further in the Bill it states that the Minister of Finance must, after considering the cash requirements of Eskom, as verified by National Treasury, decide on the dates and amounts of transfer. The responsibility to transfer the funds falls on the Accounting officer of the DPE and the transfer must be done in accordance with the Public Finance Management Act. There is also a clause similar to the past annual Appropriation Acts which provides for the Minister of Finance’s ability to impose conditions on any part of the R23 billion. The aim of this is to promote transparency and efficient management of revenue, under section 1(g) of the Public Finance Management Act. The Bill enables the Minister to stop the use of any of the appropriation until a condition is met. If National Treasury decides to stop the funding then there must be a report to these Committees.

Eskom Subordinated Loan Special Appropriation Amendment Bill (2008/09-2010/11 financial years) [B17-2015]
Mr Julies moved on to the Eskom Subordinated Loan Appropriation Amendment Bill, which deals with a conversion of the loan of R60 billion to Eskom announced by the Minister of Finance in 2008/09. This was also transferred to Eskom in tranches. These were R10 billion in 2008/09, R30 billion in 2009/10 and R20 billion in 2010/11. The request now is that this loan which was a deeply subordinated loan be converted into equity, in order to improve the financial position of Eskom. The Eskom Subordinated Loan Special Appropriation Act details the conditions of the 30 year loan and it is deeply subordinated because Eskom would be required to pay all other creditors before it would repay government. Interest is payable, but this is subject to a specified credit matrix and this means that the financial position of Eskom would have to be above a particular standard, for it to be required to pay the interest. The same applies to the guarantee fees which government charges Eskom for the guarantee facility provided. The conversion of the loan to equity was one of the measures of the support package and aims to improve the balance sheet of Eskom. The conversion of the loan to equity results in the debts of Eskom being reduced by R24 billion and an increase of R24 billion in equity. This will result in an improvement of Eskom’s debt to equity position. Looking at the free funds from operations against total debt at Eskom this improves from 4.3% in 2015/16 to 4.6%. Looking at free flowing funds as a percentage of total debt this would improve to 14.2 in 2017/18, as opposed to 13.4% in 2015/16. A conversion of a loan to equity will not result in any actual cash flow impact, because the R60 billion has already been transferred and Eskom was not required to pay anything back. It is beneficial to Eskom as it shows government’s support of the business. Taking both Bills, the implication is that Eskom should be in a better position to raise debt in the capital market, more cheaply, both locally from entities such as pension funds and in the international market, within the R200 billion remainder of the guarantee facility.

Ms van Schoor said the clauses aim to amend the Eskom Subordinated Loan Special Appropriation Act. First the reference to Eskom is changed in line with the new Companies Act to reflect that Eskom is a State Owned Enterprise. The later clauses deal with the transaction outlined above and the clauses removes the provisions dealing with the loan agreement and replaces them with provisions for the issuing of ordinary shares to the value of R60 billion. Clause 1 stipulates that the loan agreement will lapse when Eskom issues the shares to the State. Lastly, there is a technical amendment to the short title of the Act removing the words “subordinated loan”.

Mr Julies said the debt as a ratio of total earnings, the conversion of the loan implies that the total debt to earning improves from 14.2% under the loan, to 13.3% with the conversion in 2015/16, with a projected improvement of debt to earnings from 6% to 5.6% by 2017/18.

Discussion
Mr C de Beer (ANC, Northern Cape) said this was a short presentation with a huge effect on every South African. The history is known and the Minister of Finance spoke about this at the tabling of the National Budget and also at Budget Review. Parliament is serious about its work and it cannot let Eskom collapse. From the Select Committee and the organisation which he represents in Parliament he proposes that the Bills be supported.

Ms S Shope-Sithole (ANC) said she felt the Committees should support the proposal. Particularly, because South Africa is a developmental state and state intervention is at times necessary, as is presently the case. Therefore, as responsible parliamentarians, Eskom cannot be allowed to collapse. The Committees would like to see that the assistance to Eskom results in accountability, so that Parliament can keep its finger on the movement of the funds. Parliament needs to know on an ongoing basis that the improvement of Eskom’s balance sheet translates into improved service delivery. When the Department of Trade and Industry presented, it raised the issue of government systems not relating to each other, which impedes departments from overseeing parastatals. She hoped that Eskom would speak to its mother Department and ensure this was not a problem. The substantial amount at hand leads to the need to ensure that there is quarterly accountability on whether the injection of funds has resulted in improved service delivery.

Dr M Figg (DA) said on the second slide of the presentation there is an error where it states that electricity demand has been lower. It should read that the supply has been lower, because the demand has remained high and electricity was not supplied. On the sale of assets, the presentation states that significant progress has been made in making funds available. He wanted an indication of the total value of assets available and whether the stock of assets has been identified. On the R23 billion, he asked if this was loan and whether it would also be converted to equity in the future. He wanted clarity on what was meant by a second R10 billion tranche being transferred “by December”. He agreed with Ms Shope-Sithole that one can see that we need power, but that there is a need for people to be accountable. He was not saying that he was not in support of the Bills, rather that there must be accountability. He asked if the R23 billion will cover maintenance costs or will it only be capital expenditure. It seems that this is a loan which may not need to be paid back, therefore why not just be forthright and call it what it is from the beginning. On the issue of the equity which is being given as consideration for the loan he asked how many shares have been issued, authorised, what their value is and what the percentage of shareholding government would then hold in Eskom. He asked if dividends would be paid in return. If this is not the case the equity will not be looked after, because Eskom will then know that a further loan may be asked for to be converted into equity in the future.

Mr A McLaughlin (DA) said while he agrees there is basically no option but to support this being done, personally he did so with reluctance. He was of the opinion that “Eskom is the author of its own misfortune”. He agreed with Dr Figg’s statement that it is incorrect to state that electricity supply has been lower and said this statement is indicative of the whole problem at Eskom. How can a demand be anticipated which could not possibly be supplied and then complain that this is due to Eskom not being able to do business. This is a huge management problem and Eskom not having “any management capabilities” is why such statements are made. Eskom has been lent R60 billion since 2008 and now government is letting Eskom off the hook in return for shares. Eskom is a 100% state owned enterprise and government will now have shares in its own enterprise, which it already in effect owns. He did not think this sounded like a good idea. Why are the shares not being placed on the stock exchange and offered to the public to allow them to “get a piece of the action, if they feel it’s worth having”? There is a R60 billion loan, on which interest has accrued and now the loan is being written off for R60 billion. Is the interest going to simply vanish, because then Eskom would be getting a really good deal. On the guarantee costs, he did not understand what the guarantee was required for because this would usually be used to obtain a loan, but government itself granted the loan. He therefore assumes that these guarantee fees relate to some other money and is it the case that these relate to the R350 billion facility available to Eskom. If so what is going to happen to these fees? There is a statement in the presentation which indicates that “Eskom has not been required to make payments on interest or guarantee fees”, but does this mean that the fees have not been incurred up until present? If they have been incurred, what for if they have not had to go and source the money elsewhere. If Eskom is going to be loaned R23 billion what is their current business situation and what is their estimated turnover once the infrastructure is completed? Will Eskom be able to afford this loan? If this is the case, then as Dr Figg said, why not simply “call a spade a spade”. He was greatly concerned as to why more money is being given to Eskom where it has a R350 billion facility and has not made full use of it. In bullet 3 on slide 4 it states that in terms of Clause 1(2) the Minister of Finance must after considering the cash requirements of Eskom, as verified by National Treasury, determine the amount and date of each transfer. However, National Treasury has indicated that the dates and amounts for the transfers have already been determined. These statements contradict themselves so he did not understand what reason there was for the provision allowing the Minister to decide.

Ms E van Lingen (DA, Eastern Cape) said she found it strange that improvements in the various figures as projected by National Treasury are not in the presentation and therefore Members would never be able to hold Treasury to these figures. Therefore, these figures need to be presented in writing, because only then will Members be able to properly consider it and follow appropriate procedures.

Mr A Shaik-Emam (NFP) said there is no doubt about the serious problems faced and not supporting the Bills would not be in the interest of the country. It is not only South Africa’s citizens who rely on the electricity, as neighbouring countries also make use of Eskom’s electricity. He was concerned that on the R60 billion loan, surely government should be receiving something like R80 billion worth of shares, because interest although not paid had accrued. The essential question is how long will it take and how much money will be required for Eskom to have its affairs in order once and for all. South Africa needs to know where Eskom is heading and how much money is required to resolve the problems. He was in no way saying that this should not be granted, having seen individuals and businesses suffering as a result of electricity shortages. An important question was what is the impact on local businesses and industry when Eskom chooses to supply other countries with electricity. He asked if the equity of R60 billion was profitable or whether the position is that as it is a state owned entity, government has a responsibility to bail it out in the interest of the country. His understanding was that the R23 billion was being allocated to Eskom and he did not know whether National Treasury was playing with words. Lastly, he asked if the assets to fund the R23 billion have been sold, seeing as the first tranche is due in June.

Mr F Essak (DA, Mpumalanga) asked when Eskom would physically issue the shares to the state to conclude the process. Secondly, at what point does National Treasury begin to apply common business principles, recommending to Parliament that Eskom be privatised and placed on the Johannesburg Stock Exchange. For how long will the state dedicate money to an investment which is turning out to be a liability? At some point, common business principles must begin to prevail.

Ms E Louw (EFF) said on the first slide which outlines the background, she felt that this was where the basic business principles need to kick in. If this is done properly, then the situation will turn around. It needs to be ensured that value for money is gotten out of every cent that is put into Eskom. Eskom does need to be funded and sustained, but this does not mean that this should be done without having regard to business principles. It needs to be acknowledged that there are challenges and these need to be alleviated not only through the injection of money, but also by ensuring that the most capable people are in place to look after this money and the power stations themselves. Eskom’s present financial situation raises the question about whether we have the correct people in place, who are able to handle these monies properly. Coming to this Committee for the first time, she wanted to get an understanding of the background. As this would inform Members of how many years Eskom will be in difficulty, because the more we address the matters raised in the background, the better the situation will be. Ms Shope-Sithole said there is a need to have reporting, this will help ensure that value for money and results are being achieved. If this is not done, then in the future a similar need for money will arise. It is important that the background is taken into consideration, because this is where the crux of the matter lies. She agreed that an asset register will help inform Parliament of exactly what assets are available and what their value is. She would definitely be in support Eskom, but this will require close scrutiny.

The Chairperson informed the Committee that he has invited the Department of Public Enterprises and Eskom to present on 12 June. It has been agreed that it will be a joint meeting of committees, because some of the issues being raised need to be raised directly with the Department of Energy (DOE) and Eskom. It was planned for this Friday, because public hearings were anticipated by the following week.

Mr Julies said he would do his best to respond, given that the line department responsible for Eskom was the DOE. Clearly it is important that with the allocations it is expected that there is will be an improved position. Although this would not be a completely rectified position because it is not just these two aspects of the support package which will bring about a change in the entity. Rather it is part of a whole range of interventions, including the guarantee facility and the tariff increases, to the extent that the regulator allows this. A number of independent power producers are being considered, which will increase supply to the grid resulting in an improved demand/supply dynamic. The other power suppliers include renewable energy and gas, but also coal generation. Certainly it is the aim to ensure that the improved financial position leads to improved service delivery. This is the role which the Deputy President is playing, since the announcement in December last year that oversight of several state owned enterprises including the South African Post Office, Eskom and South African Airways would fall to him. This has allowed for a much closer relationship between the relevant entities including DPE, Department of Energy, the Presidency and National Treasury. Further, it helps ensure that what is done by National Treasury on the finances side translates into improvements on the operational end.

Mr Julies said he could not comment deeply on the operations, but there needs to be a closer collaboration within the entity between the various divisions dealing with operations and financial management, as this was necessary for the improved finances to translate into improved delivery. The type of borrowing and the revenue it generates from increased tariffs bears on the basis of the operational plan. Therefore, all the work being done by the Ministries feeds into a corporate plan which the line Ministry looks at. This corporate plan captures the operations and the finances and projects, what the borrowing needs to be on the basis of tariff adjustments, the equity injections and the loan conversion. The figures on changes in debt as a percentage of total earnings came from this corporate plan. On the demand supply, the reference to a drop in demand was referring to drops due to high tariffs. If the tariffs have undergone significant increases, then it is an implication that demand would drop. People are using electricity less and there has been a clear drive to save and consume less electricity, which has been an Eskom initiative. All the demand management initiatives, such as encouraging people to switch off geysers, were aimed at reducing demand. Therefore, it has the implication of lower revenue. On the value of total assets available for sale, he was not aware of their value. However, there are non-core assets which will be sold to generate the amount and the transaction currently being undertaken will meet that requirement. The total value of all the non-core assets will have to be provided in future.

On why the R23 billion is being phrased as a loan, Mr Julies said the two Bills should not be confused, because there is a R23 billion equity injection in one Bill and a separate Bill dealing with the conversion of the 2008 loan into equity. When the loan was initially made the decision was based on the conditions which prevailed at Eskom at that time, which was subordinated to the point where it could be considered something very close to equity. It was National Treasury’s assessment of the situation then that brought about the loan. Looking at the situation now, it has in fact deteriorated and the financial position requires something more convenient than a loan as was decided in 2014.

On the “by December”, in the presentation it states that the second tranche will be in December, but if the situation is such that Eskom requires the funding before then, then Treasury should be in the position to make this happen. So the transfer is in the tranches stipulated, being by June, by December and by 2016/17.

On the application to increase tariffs, this is something which is regulated by the National Energy Regulator of South Africa and this process will include an assessment of Eskom’s financial position and the inputs of various stakeholders. This is a consultative process and the decision is made by an independent body and not a decision which Treasury, DPE or Eskom can make.

On the number of shares being issued, while government is the sole shareholder in Eskom, then the value of what is being provided to Eskom is reflective of what will be received by government. Government is therefore converting the loan into equity and the equivalent of the R60 billion loan is the value of the shares. On whether dividends would be paid, his understanding was that there have been times when Eskom was in a stronger financial position and it in fact paid dividends to government. This was when Eskom’s rating by international ratings agencies was better than the state’s and at these times dividends were paid. Currently Eskom is not in the financial position to pay dividends, and if it had dividends to pay this money would be better used to fund the capital investments and the new infrastructure drive.

On the ratios referred to in the presentation, these are used in the corporate plan and he had taken the figures from the Cabinet Memoranda, which are public documents and will be made available to the Members.

Mr Julies replied to the question on why there is a need for payment of guarantee charges, when there is a guarantee facility. As mentioned earlier the support package to Eskom comprises various elements, of which borrowing is one and the equity injection another. This is part of the totality of the support package and the R350 billion is to allow raising of funds in the capital market. Some of the borrowing which Eskom has done is without a guarantee and it is at its discretion whether to use the facility or not. The R200 million remaining in the facility is not what will be borrowed at once, rather it is to aid Eskom’s borrowing programme. There is a fee that is paid for the facility, at 30 basis points. The process involves National Treasury and the relevant Ministries and the Minister of Finance decides to give a guarantee or not. This is not a facility given to state owned entities free of charge. The clause in the Bill means that Eskom would be exempted from paying the guarantee fee based on its financial position, not that it is unable to pay the fee. Whether the loan will be paid back is dependent on the success of the efforts to improve Eskom’s position. All persons, who have invested in Eskom, loan the money on the expectation that the debt will be serviced. Currently Eskom has debt and it is servicing the debt. Eskom has not defaulted on any of its debt, either under the guarantee facility or otherwise. It is currently servicing its debt.

Ms van Schoor responded that the Minister had indicated when the money should be transferred to Eskom, but in terms of the Bill it is proposed that it should not stipulate the detail of when the transfers should be made. However, the proposal is for an appropriation in the present financial year. Should all the money not be used, then there is the possibility of a roll over. It is important to have flexibility, to allow the provision of the funds as and when required. What is clear is that the first amount of R10 million will be required by the end of June.

Mr Julies said, having explained the value which government was receiving for the equity, he could not see how one could expect more than R60 billion. On how long the situation will continue, he was not in a position to indicate how much money will be required. He could say that with the interventions under the auspices of the Deputy President, there has been a much closer relationship with all involved including the treasury department within Eskom. Therefore, there is an improved insight into the workings of Eskom and this provides a better picture of what will be happening. There is currently regular reporting within the relevant Ministries and a lot of information is being presented there. He was sure those parties would take it upon themselves to inform interested Members. The situation certainly impacts on local businesses and this is why the Minister announced that one of the key constraints of the fiscal framework has been the state of state owned enterprises. A key enterprise is Eskom and it has been identified as a risk to the fiscal framework. The biggest constraint to growth is the constrained supply of electricity and all are feeling the impact of irregular electricity supply. What can be said is that Eskom has moved away from unscheduled outages, to a more planned and scheduled system of outages. This provides more predictability, but is still not desirable. Eskom is not profitable and this is why these interventions are being put in place to turn the situation around. What it implies is that by government putting these funds into Eskom, a contribution is being made towards a better energy situation and also a better economic situation for the country. This has implications beyond just saving Eskom, but will also allow government to borrow more with a lower deficit. On the R23 billion, this is a direct equity injection into Eskom and this speaks to the concern about terming the transaction a loan. While the R60 billion which was initially a loan is now being converted into equity.

On when Eskom will be sorted out, Mr Julies could not say when the situation would turn around completely, but these will be discussed by the line ministries on the operational side, because although not a financial problem per se the financial position needs to improve to translate into improved operations, maintenance programmes and generation capacity. National Treasury is on track to meet the first tranche which is R10 billion in June. The remaining R13 billion will follow in December and by 2016/17.

Ms van Schoor noted that the Bill states that the 2008 loan will be extinguished upon issuing of the shares. However, the process is being dictated by the provisions dealing with authorised share capital under the Companies Act. It is in the interest of Eskom to complete this as soon as possible and this will have to be completed by DPE and Eskom.

On the application of common business principles leading to privatisation, Mr Julies did not feel these were issues which he could talk to. However, the types of interventions being put in place can be characterised as low hanging fruit which can be implemented whether or not Eskom is privatised. The interventions by the Deputy President and various Ministers are measures which can be done to fix Eskom in the present context. Better collaboration between the financial and operation sides of the business and relations with various Ministries in government, under the auspices of the Deputy President and Presidency have allowed for better collaboration and therefore efficiency in decision-making to address the situation. He agreed that the background challenges have contributed to the problems currently faced. These issues have not adequately been addressed and need to be more adequately addressed moving forward. He remained positive that over time Eskom will be in an improved position and this is why the background was highlighted. Reporting was happening, within Parliament and there is reporting on budgets. This is an environment where the need for frequency of information is high and therefore regular reporting is required. The planned meeting in the Committee on 12 June is a testament to the need for regular reporting.

The Chairperson said he wanted to have another round of questions, but time constraints means that the questions will have to be quick and he reminded Members that Eskom would be present on 12 June.

Ms R Nyalungu (ANC) said as a developmental state, government needs to intervene where there are challenges facing the citizens. National Treasury is trying to do just that and Members should support it. Eskom in the past used to develop skills internally and were not outsourcing as much work. This lead to the entity being efficient and allowed it to produce more of an output given the constrained resources. Is National Treasury in the position to check on this, given the President’s call to reduce the use of consultants? If the money is given then it must be used in an efficient manner, with as little use of consultants as possible. She was not sure what stopped Eskom from developing skills internally, because this had even helped with the maintenance and she believed maintenance costs would not be as high as they presently are, had Eskom continued developing skills. She wanted to check how much Eskom would need to stabilise the maintenance programme for the old infrastructure and how much has been requested from National Treasury.

The Chairperson reminded the Committee that Eskom will be present and National Treasury can respond in the meantime.

Dr Figg said the Bill states that the payment is subject to transfer into the National Revenue Fund of revenue from the sale of assets. R10 billion of the transfer was to be paid in June, although he was not aware that the assets have been sold. Mr Julies had said he could not see how additional value could be added to the shares. However, Mr Shaik-Emam was correct, because the loan had been concluded seven years ago and surely interest, whether paid or not, must have accrued. Therefore, the value of the shares must be more than R60 million. According to the Companies Act, the shares have to be issued at market value and a loan of R60 billion seven years ago was not worth R60 billion today. On dividends, he understood about the cash flow restraints, but the dividends should at least accrue. There needs to be some expense to Eskom and this would be interest if it is a loan and dividends if it is equity. These must be recorded in the financial statements and one cannot “cook the books” and record such entries simply to make a company viable. This selling of shares to an associated company and not offering the shares to anyone else, is on dubious legal terrain. He reiterated that he does not disagree with the funding of Eskom, but rather a better explanation of how this is to be done, is required.

The Chairperson said because the Member’s questions are difficult, National Treasury can respond in writing, although they will be invited for Friday’s meeting.

Mr Shaik-Emam said while he appreciates Eskom would be appearing in future, National Treasury was asking the Committees to approve the Bills. National Treasury needs to give Parliament a guideline as to where Eskom is headed and it must have interacted with Eskom. Otherwise, Parliament will continually be approached for further funding and it needs to know what the end objective is. He agreed with Dr Figg that R60 billion seven years ago is not worth R60 billion today and in effect government is receiving less value than the R60 billion initially loaned. He would like to know what non-strategic assets have been sold thus far to meet the deadline of the end of June. This information is important for Members, because MPs face the brunt of this problem and need to be able to give answers to the public. Members need to know where Eskom is headed and what the position is, so that they can go out and say: yes, there is a challenge but there is an end goal. He would not agree if he was told the answer is not known, because it is known what the demand and supply levels are, what the infrastructure situation is at present. Therefore, a needs analysis needs to be done to indicate where Eskom needs to go.

Ms van Lingen said the reporting issue was a big problem to her, because there are four different entities which are accountable (National Treasury, the Deputy President, DPE and Eskom) on this issue and these entities are playing football with Parliament, because when questions are asked they are passed on to other entities. How can Parliament approve things when it has no insight into the problems. On the opportunity costs, is the investment in equity really the best option and would it not be better to go for a public investment on the stock exchange. Will the sale of the assets be in line with the tranches to be paid or is National Treasury going to give Eskom a bridging loan in the meantime.

The Chairperson said the Minister has indicated that the process for the sale of the assets is well underway and the Committee would receive a briefing shortly. The intention is for this transaction to be fiscally neutral.

Mr N Gcwabaza (ANC) said he thought many of the questions being raised would ordinarily be directed to DPE or Eskom. He was not sure National Treasury would be able to deal with all of them. He thought the Committee would deal with the contents of the Bills before it and will have to deal with that part as the Committees themselves. Members know what the source of the R23 billion will be and the rest of the questions should be directed to the Departments and Eskom.

Ms Shope-Sithole said she felt National Treasury had given the Committees what they have asked for and going forward the two Committees should always work together and call all the stakeholders together. This will ensure there are no worries about anyone trying to hide information. What is important as the Appropriations Committees is that the money needs to be followed. Members will not wait for the quarterly reports, stakeholders will be called and she pleaded that when they are called, they come.

Mr A McLaughlin (DA) said there seems to be a series of interventions, but he could not see what Eskom actually needs to resolve its current situation.

Mr Julies said a lot of this discussion will be happening on 12 June. The loan given in 2008 was not a normal market related loan and there are specified terms and conditions which are not the same as a normal loan. In this case the loan was a 30 year one and would be subordinated to any other debt. The interest would be payable, but payment was subject to a specified credit matrix and financial profile. However Eskom has not met these requirements and interest was not therefore payable. The point was that this was a subordinated loan, rather than a market related loan. The various elements of the support package to Eskom are what is required to ensure that Eskom reaches the position where the problems with generation, maintenance and transmission costs have been resolved. The further points will be responded to in writing.

The Chairperson declared the meeting adjourned.