Chinese bank halts R7 billion payment to Eskom over spending concerns

Chinese bank halts R7 billion payment to Eskom over spending concerns

- China has withheld a R7 billion payment to Eskom over fears that the entity will stop construction at Medupi and Kusile

- The loan had been meant for the construction of the two power plants and has been put on ice over fears that it will go to salary payments and diesel

- This loan forms part of a larger R33 billion agreement which the entity entered into less than a year ago

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China is reportedly so concerned over Eskom's commitment to the construction of Medupi and Kusile that it has withheld a R7 billion payment over fears that construction will stop.

The Chinese Development Bank was meant to transfer the funds in March, but had opted not to, which resulted in a R3 billion short-term loan granted by ABSA, reports News24.

The South African government later said that the bank would be transferring the funds last month, which also failed to transpire.

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This has resulted in senior Public Enterprises officials flying to Beijing to consult with the bank, confirms Pravin Gordhan's spokesman, Adrian Lackay. Meetings went smoothly and the transfer is expected soon, with the loan still intact.

The R7 billion payment forms part of a R33 billion loan which had been entered into the entity and the Chinese Development Bank just under a year ago.

These delays were reportedly over concerns that the funding would be redirected away from the construction of the power plants and used for salaries and diesel for turbines instead.

Rumours had circulated that construction on the power plants would stop completely as Eskom considered scrapping the projects, but Jabu Mabuza, chair of the entity, has confirmed that construction would continue after a full analysis of the situation.

While there had been concerns over shares in Eskom being owned by the foreign company, the loan was backed by the government itself and the utilities assets remain intact.

An expert has commented on the matter, saying that the R7 billion payment would help Eskom pay bills over the short term. However, the state would need to provide a larger bailout to plug the R250 billion hole in the entity's balance sheet.

If this fails to happen before the end of next month, auditors are expected to qualify Eskom's finances as a result of its inability to proceed as a going concern, which could have disastrous implications for both the utility and South Africa.

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