TIME FOR ESKOM TO MAKE TOUGH CHOICES
Between January and March, Eskom raised R43bn from investors and lenders who have clearly warmed up to the new board and management team appointed in January. This is one of the few positive aspects of Eskom’s financial results for the year ended March, which showed the utility also lost a net R2.3bn in the period. Last year it made a net profit of R900m.
The other welcome piece of news is that Eskom is on the verge of securing up to 80% of the current financial year’s borrowing requirement of R72bn. This would put it firmly on the road to finishing its huge Medupi and Kusile power stations at Lephalale and Emalahleni, which will cost over R300bn at completion in 2023. By then, Eskom’s debt will be an unprecedented R600bn, from the current R387bn.
These milestones have been achieved since the departure of former executives Brian Molefe, Anoj Singh, Matshela Koko and others in the executive team, together with the boards appointed by former public enterprises minister Lynne Brown. Frankly, far too many of the people who found themselves on the board of this strategic utility, including Zethembe Khoza, should never have been allowed near any position of influence, let alone Eskom.
The board under Jabu Mabuza’s leadership and management under Phakamani Hadebe have a lot of what the previous boards and key executives have lacked in terms of business experience.
Most importantly, they also have what the previous boards and management teams seem to never have considered: ethics, and the desire to serve the best interests of Eskom and SA.
That they have come in and cleaned up, firing many of those implicated in the rampant corruption and laying criminal charges against them, is admirable and bold.
These are also the easiest of the many steps in the long road to fixing Eskom. The hard task will be to eradicate the culture of impunity. That would involve a vigorous pursuit of those who benefited illegally from the R19.6bn in irregular expenditure the utility incurred in the years since 2012. In addition to this, there are known cases of brazen theft of resources by Eskom executives. As far as possible, the cash must be recovered and people must be jailed.
To this end Eskom has laid 11 criminal charges, including against nine executives. And 75 employees have been fired after 628 disciplinary processes since April. These come in addition to the departure of 10 executives since January. It is also in the middle of lifestyle audits that have already caused the departure of seven employees who had been doing business with the utility.
These measures should not only be designed to pacify edgy investors and the public, but to instil a new culture in which only conduct that is in Eskom’s best interests will be tolerated.
The biggest elephant in the room, however, is the bloated cost structure. Eskom’s results show it now produces roughly the same amount of power as it did in 2006. Yet it employs more than 16,500 more people than it did back then.
Fixing the cost structure, starting with paying only the correct prices for inputs such as coal and the logistics that get the coal to where it is needed, should be the start. This might help persuade a rather militant workforce to accept some job losses. In September Eskom will commence discussions with its employees on this.
Eskom is struggling with debt that is costing it interest of R41.5bn at current levels. It will get worse before it gets better. Demonstrating a will to make the hard choices would be a great step towards redemption in the eyes of the funders.