Job losses loom as Eskom adds R33bn to its debts

While the $2.5-billion (about R33-billion) loan that electricity producer Eskom secured from the China Development Bank last week will go a long way towards helping the utility complete its programme of building power stations and other infrastructure, it has also added to its bulging debt bundle.

The power stations will add 9,600MW to take Eskom's total installed capacity to more than 50,000MW when the plants are completed in 2023. When the build programme started in 2007, Eskom had installed capacity of 40,000MW. Two generating units are already contributing to the system at Kusile, which is just outside Emalahleni in Mpumalanga, while five units at Medupi near Lephalale in Limpopo have also been connected to Eskom's network.

The amount of debt poses a serious and real risk, not only to the financial sustainability of Eskom but also to the whole South African banking system, as the utility is the single largest borrower behind the sovereign.

This week Eskom said its profit before interest, tax, depreciation and amortisation (ebitda) stood at R45.4-billion. But the interest swallowed up R44.5-billion, leaving the utility with a R2.3-billion loss. Eskom only generated R37.6-billion of cash from sales of electricity. This means it had to borrow money in order to repay the money it already owes funders.

This is unsustainable, said chairman Jabu Mabuza, adding that the utility was working on a plan to restructure itself. This plan will be made public in September.

Pressed on what the utility could do to put itself in a selfsustaining position, Mabuza said Eskom had no choice but to cut its debt load. It also had to cut its other costs, the biggest of which were coal procurement and staff expenses.

Eskom has a bloated staff complement, which Mabuza said the utility would address when it releases the restruc- turing plan in September.

Pressed on whether there would be any job losses, Mabuza said studies the utility had conducted revealed it had 33% more people than was necessary.

"But we are dealing with the issue of wage increases right now. We have agreed that it would not be fair for management to raise the matter of restructuring while we are talking salary increases," said Mabuza.

Trade unions have made it clear they will fight any job losses with everything they have.

The National Union of Metalworkers of SA (Numsa), the largest trade union at Eskom, has even gone as far as accusing the current management of preparing Eskom for privatisation.

But we are dealing with the issue of wage increases right now