Light at end of tunnel for Eskom
Utility finances now improve
TWO months into the new financial year, Eskom says it has successfully raised more than R13-billion, narrowing its funding gap to R58-billion for the year ending March 2019.
This was 10% ahead of the electricity producer’s target as lenders opened their wallets since the start of 2018, newly appointed chief executive Phakamani Hadebe said this week.
It is a big turnaround for the utility, after it ran out of cash in late 2017, with major lenders declining to lend it money amid rampant corruption.
In February, Eskom relied on an emergency 30-day loan from the Public Investment Corporation to pay salaries and meet its running costs.
Hadebe said the utility had managed to raise the R13.16-billion from local institutions.
Eskom’s funding requirement for the 2019 financial year is R72billion, meaning it needs to find another R58-billion. About R8-billion of this would be raised through domestic bond markets, an official from Eskom’s treasury department said. The power utility had outstanding debt of R367billion in the six months to endSeptember.
Major financial institutions stopped advancing loans to Eskom in 2017, as a meltdown in the power utility’s corporate governance fuelled doubts about its financial viability.
Eskom incurred a R3-billion irregular expenditure in the year to March 2017.
The lack of funds resulted in Eskom running out of cash to fund operations and working capital, including paying the salaries of its almost 48 000 employees and meeting financial obligations to lenders.
After Cyril Ramaphosa’s election as ANC president in December, Hadebe was made acting chief executive in January, and a new board, led by businessman Jabulane Mabuza and former energy director-general Nelisiwe Magubane, was appointed.
They replaced Eskom lifers who were accused of corruption and the Zethembe Khoza-led board that was accused of abetting corruption at the utility.
Last week, Hadebe was formally appointed to the position.
Within the first week of the new board’s appointment, it suspended or fired about six Eskom executives and senior managers, including former acting CEOs Sean Maritz and Matshela Koko. Both resigned after being charged, thus avoiding answering to the allegations of wrongdoing.
Former chief financial officer Anoj Singh resigned two days after the new board’s appointment in January. He was suspended in September when some lenders, including the Development Bank of Southern Africa, threatened to recall their loans after the utility breached some of its debt covenants.
Hadebe said the departure of those accused did not mean they could not be held accountable should any evidence of wrongdoing against them be uncovered.
“We are reviewing all procurement contracts” and the company had completed about 95% of those valued above R1-billion and 90% of those less than that amount,” he said.
The outcomes of the internal probes will largely be known by September.
Six teams of investigators, including the Special Investigative Unit, were also combing through Eskom’s documents and systems to find evidence that could be used to prosecute those accused, Hadebe said.
As part of the clean-up operation, the head of procurement and that of primary energy [coal], Jay Pillay and Ayanda Nteta, were suspended along with the managers of three power stations.
Eskom is also undertaking lifestyle audits of its executives and senior managers.
“For the F-band the audits started two weeks ago, and this should take another two months,” Hadebe said.
The F-band is the top management layer comprising 15 executives and senior managers.
“We’re not only looking into the affairs of the employee, but we will include the spouses and children and other close relatives and associates in the audit,” Hadebe said.
This is the second time Hadebe has been given the task of conducting a clean-up at a stateowned entity. In 2008, he was transferred from the Treasury to conduct a similar task at the Land Bank. During his five years there he restored the sustainability of the lender to the agricultural industry.